Question

You take out an installment loan to purchase a fishing boat costing $3,900. You make a down payment of $1,000 and finance the balance by making monthly payments of $100.53 for 36 months. Use the APR formula to find the APR.

Answer 1

APR formula = (Finance charges/total balance) x 365

Purchase price = $3,900
Downpayment = $1,000
Total financed = $2,900
Payments (36m) = $100.53
Total amount = $3,619.08

APR formula = (Finance charges/total balance) x 365
APR = ($3619.08/2900) x 365
APR = 4.5%