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Steve needs an installment loan of $1,900. He must repay the loan at $169 a month for 12 months. What is the APR?

Sagot :

Using simple interest, it is found that the interest rate for the 12-month loan is of 6.74%.

Simple Interest

Simple interest is used when there is a single compounding per time period.

The amount of money after t years in is modeled by:

A(t) = A(0)(1 + rt)

In which:

  • A(0) is the initial amount.
  • r is the interest rate, as a decimal.

In this problem, we have that the parameters are given by:

t = 1, A(0) = 1900, A(t) = 12 x 169 = 2028.

We have to solve for r to find the APR, hence:

A(t) = A(0)(1 + rt)

2028 = 1900(1 + r)

1 + r = 2028/1900

1 + r = 1.0674.

r = 0.0674.

Hence, the interest rate for the 12-month loan is of 6.74%.

More can be learned about simple interest at https://brainly.com/question/25296782

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