Question

Calculate (a) the amount financed, (b) the total finance charge, and (c) APR by formula. (Do not round intermediate calculations. Round the "Finance charge" to the nearest cent and "APR" to the nearest tenth percent.)

Purchase price of a used car	Down payment	Number of monthly payments	Amount financed	Total of monthly payments	Total finance charge	APR
$5,433	$1,103	48	$4,330	$5,489.76	$1,159.76		%

Answer 1

The computations are shown below:

(A) For finance amount:

= Purchase price of car - down payment

= $5,433 - $1,103

= $4,330

Hence, the finance charge is $4,330

(B) For total finance charge:

= Total of monthly payments - finance amount

= $5,489.76 - $4,330

= $1,159.76

Hence, the total finance charge is $1,159.76

(C) The formula to compute the APR is shown below:

= (Total finance charges/ amount financed) / number of monthly payments * number of months in a year * 100

= ($1,159.76 / $4,330) / 48 * 12 months * 100

= 0.2678/48 * 12 months * 100

= 6.69%

Hence, the APR is 6.69%