Joshua borrowed $2,200 for one year and paid $132 in interest. The bank charged him a service charge of $21. The finance charge on this loan is 6.9%.
Suppose there is an initial amount as P.
The interest, or say charge on it is applied annually as 'C' amount.
Taking how much percent of P is C, we get:
[tex]APR = \dfrac{C}{P} \times 100[/tex]
Given;
Principal =$2,200
interest = $132
Service charge = $21.
To find finance charge we use
Finance charge (FC) = interest + service charge(SC)
= $132 + $21
= $153
Therefore
APR = Finance charge / Principal
= $153 / $2200
= 0.069 or 6.9%
Therefore, The finance charge on this loan is 6.9%.
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