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You're borrowing $ 4 , 0 0 0 for two years with a stated annual interest rate of 4 % . Complete the following table.
You're borrowing $ for two years with a stated annual interest rate of
Complete the following table. Note: Round your answers to the nearest dollar.
Principal $
Finance charges
Loan disbursement
Total payback
Annual Percentage Rate APR
You also want to calculate the APR annual percentage rate and compare it to the stated interest rate.
First, compute the average annual finance charge by dividing the total finance charge by the life of the loan, which is two years years Enter this value in the following equation. Note: Round your answers to the nearest dollar.
Next, as a singlepayment loan, the average loan balance outstanding is constant at the
Enter the value for the average loan balance outstanding in the following equation. Finally, complete the calculation for APR and enter it in the following equation. Note: Round your answers to the nearest dollar and your percentage point to the nearest two decimal places.
APR Average Annual Finance Charge Average Loan Balance Outstanding
The APR is the stated interest rate because the
Term of the loan is more than six months
Loan is a singlepayment loan
Formula to compute finance charges is the same for the discount and simple interest methods
Discount method was used to calculate finance charges
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