The Finance Charge and the Annual Percentage Rate (APR).

Credit costs vary from one lender to another, so think before you sign anything. Federal law requires that the lender tell you the total finance charges and the annual percentage rate or APR.

The finance charge is the total amount you pay to use credit. It includes interest costs and any other fees (such as service charges and insurance) that the seller or lender may be entitled to add to the loan.

The annual percentage rate, or APR, is the cost of credit calculated as a percent on an annual basis. For example, if someone lends you money at «only» 2.5 percent per month, the APR would be 30 percent (because 2.5 x 12 months = 30 percent).

Assume that a person borrowed $1000 at 10 percent interest. He agreed to pay the principal and interest back in 10 monthly installments. Calculate the APR with the following formula:

m is the number of payment periods per year (12 if the payments are made monthly; 52 if made weekly).

ch is the carrying charge or interest (the cost of the loan beyond the amount borrowed).

P is the principal (the amount borrowed).

n is the actual number of payments made.

Дата добавления: 2015-08-20