Question

Joshua borrowed $1,000 for one year and paid $100 in interest. The bank charged him a service charge of $10. If Joshua repaid the loan in 12 equal parts, what is the APR?

a. 8%
b. 9%
c. 10%
d. 12%

Answer 1

Joshua's APR for the loan is 11%.

Step-by-step explanation:

To calculate the APR (Annual Percentage Rate), we need to find the total cost of borrowing. The total cost includes the interest paid and any fees or charges. In this case, Joshua paid $100 in interest and a $10 service charge, so the total cost is $100 + $10 = $110.

Now, we can calculate the APR using the formula:

APR = (Total Cost / Loan Amount) * 100%

Since Joshua borrowed $1,000, the APR is ($110 / $1,000) * 100% = 11%.

Therefore, the correct answer is d. 11%.