Use an annual percentage rate table to solve the problem.
-A student has a total of $2000 in student loans that will be paid with a 48-month installment loan With monthly payments of $49.30. Determine the APR of the loan to the nearest one-half of a Percent.
A) 8.5%
B) 7.5%
C) 9.5%
D) 8.0%

Question

Quizplus · Accepted Answer

The APR can be determined by using the formula for calculating the interest rate on an installment loan or by using an APR table that matches the loan amount, monthly payment, and term. Given the total loan amount of $2000, monthly payments of $49.30 over 48 months, the closest APR that would result in these payment terms is approximately 8.5%. This calculation involves understanding the relationship between the total cost of the loan over time (monthly payment times the number of payments) and the principal amount borrowed.

Use an Annual Percentage Rate Table to Solve the Problem