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7 June, 21:45

Your uncle lends you $2,000 less $100 (interest at 5 percent), and you receive $1,900. Use the APR formula to find the true annual percentage rate. Assume you repay the entire loan in one year

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  1. 7 June, 21:50
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    APR = 5.263%

    Explanation:

    Computation of the true annual percentage rate

    Using the APR formula to find the true annual percentage rate

    APR = (2 * n * I) / [P * (N + 1) ]

    Hence;

    APR = (2 * 1 * $100) / [$1,900 * (1 + 1) ]

    APR=$200 / ($1,900*2)

    APR=$200/$3,800

    APR = 0.05263 * 100

    APR = 5.263%

    Therefore the true annual percentage rate using the APR formula will be 5.263%
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