In the equation,F

d

Fdis the finance charge for the loan. What are the other values?

Pis the amount of the loan.

ris the stated rate of interest.

tis the term of the loan in .

You're borrowing $6,000 for a year and a half with a stated annual interest rate of 6%. Complete the following table. (Note: Round your answers to the nearest dollar.)

Principal$6,000Finance chargesLoan disbursementTotal payback

Annual Percentage Rate (APR)

You also want to calculate theAPR(annual percentage rate) and compare it to the stated interest rate.

APR

APR=

=AverageAnnualFinanceCharge

AverageLoanBalanceOutstanding

AverageAnnualFinanceChargeAverageLoanBalanceOutstanding

First, compute the average annual finance charge by dividing the total finance charge ofby the life of the loan, which is a year and a half (1.5 years) =(Note: Round your answers to the nearest dollar.)

Next, as a single-payment loan, the average loan balance outstanding is constant at the , in this case,.

Complete the calculation. (Note: Round your answers to the nearest dollar and your percentage point to the nearesttwodecimal places.)

APR=Average Annual Finance Charge / Average Loan Balance Outstanding=/=%

The APR is the stated interest rate because the

Formula to compute finance charges is the same for the discount and simple interest methods

Loan is a single-payment loan

Discount method was used to calculate finance charges

Term of the loan is more than six months