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13 October, 14:01

Joshua borrowed $500 on January 1, 2017, and paid $25 in interest. The bank charged him a service charge of $15. He paid it all back at once on December 31, 2017. What was the APR?

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  1. 13 October, 14:22
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    Answer: 8%

    Explanation:

    The Annual Percentage Rate or APR for short is calculated by dividing the finance cost by the total amount borrowed in the following manner,

    APR = Finance Charge / Amount borrowed.

    To calculate the Finance charge we add the interest and the service charge.

    Finance charge = 25 + 15

    = $40

    Back to the APR formula we will have,

    APR = Finance Charge / Amount borrowed

    APR = 40/500

    = 0.08

    APR is 8%.
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Home » Business » Joshua borrowed $500 on January 1, 2017, and paid $25 in interest. The bank charged him a service charge of $15. He paid it all back at once on December 31, 2017. What was the APR?
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