Jamie is going to buy some furniture with a single-payment loan that is discounted. The loan will be for $5,000 for 2 years at 10% interest. Calculate the APR on this loan. (Show all work.)
Finance charge = $5,000 × 0.10 × 2 = $1,000
Annual finance charge = $1,000 / 2 = $500
Average loan = $5,000 - $1,000 = $4,000
APR = $500 ÷ $4,000 = 0.125 or 12.5%
REJ: Please see the section "Single-Payment Loans" for more information.
Business
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