Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question

Transcribed Image Text:**Title: Calculating Finance Charges and APR for Installment Loans**
To determine the financial aspects of an installment loan, follow these steps to calculate the finance charge (in dollars), the finance charge per $100, and the annual percentage rate (APR) using the APR table, specified as Table 13-1. It's important to round dollar amounts to the nearest cent for accuracy.
**Loan Details:**
- **Amount Financed:** $14,000
- **Number of Payments:** 36
- **Monthly Payment:** $489.00
**Required Calculations:**
1. **Finance Charge:**
- This represents the total interest and loan fees you'll pay over the life of the loan. Enter the calculated amount in this field.
2. **Finance Charge per $100:**
- This shows how much you're paying in finance charges for every $100 borrowed. Provide this rate in the designated field.
3. **APR (Annual Percentage Rate):**
- This percentage reflects the yearly cost of the loan, accounting for the finance charge per $100. Enter the corresponding APR from the table.
**Instructions:**
Begin by calculating the total finance charge. Then, determine the charge per $100 financed. Finally, lookup or calculate the APR based on the given table reference. Ensure all calculations are precise, reflecting an understanding of financial principles.
**Note:** Specific steps on using the APR table (Table 13-1) are vital for completing these calculations accurately.
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