Question

Mr. Thompson borrowed $3,000. He repaid the loan with an interest charge of $500 in 36 equal monthly payments. What approximate annual percentage rate did he pay? Find the answer to the nearest tenth of a percent.

Answer 1

The formula is
APR=(2 × n × I) / [P × (N + 1)]
APR=(2×12×500)÷(3,000×(36+1))
APR=(2×12×500)÷(3,000×37)
APR=0.1081×100
APR=10.81%