Question

Choose the correct answer. Jen Anderson takes out a mortgage for $120,000. This is a loan of 30 years at $500 per month. This gives a total interest cost of $60,000. What is the APR using the formula? APR = %

Answer 1

To calculate the APR, follow these steps: Calculate the total amount paid over 30 years, subtract the original loan amount from the total amount paid, divide the interest paid by the loan amount, and multiply the result by 100 to convert to a percentage.

Step-by-step explanation:

To calculate the APR, we can follow these steps:

1. Calculate the total amount paid over 30 years: 30 years * 12 months = 360 months * $500 = $180,000.
2. Subtract the original loan amount from the total amount paid: $180,000 - $120,000 = $60,000.
3. Divide the interest paid by the loan amount: $60,000 / $120,000 = 0.5.
4. Multiply the result by 100 to convert to a percentage: 0.5 * 100 = 50%.

Therefore, the APR is 50%.