Question

Chef Andrew Stachowick is buying a gas range. He would like an installment loan of $5,000 to be repaid in 36 months. Nathaniel Loan Company will grant the loan with a finance charge of $893.00. City Finance Company will grant the loan with a finance charge of $935.50. What is the APR on each loan?

Answer 1

To find the APR for each loan, we need to use the formula:APR = (finance charge / loan amount) x (12 / number of months)For Nathaniel Loan Company:APR = (893 / 5000) x (12 / 36) = 0.0598 or 5.98%For City Finance Company:APR = (935.50 / 5000) x (12 / 36) = 0.0625 or 6.25%Therefore, the APR for the loan from Nathaniel Loan Company is 5.98% and the APR for the loan from City Finance Company is 6.25%.