Bob businessman offers credit at 20% interest per year. APR?%

Question

Mitchell Tapia

Mathematics

25 August, 06:21

Bob businessman offers credit at 20% interest per year. APR?%

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Answers (2)

Know the Answer?

Ranger · Answer 1

Ranger 25 August, 06:42

0

Step-by-step explanation:

22.9

Short Shorts · Answer 2

APR = 21.9%.

Step-by-step explanation:

We can assume that Bob businessman offers the 20%, but interest is compounded monthly.

First we must determine the monthly interest rate = 20% / 12 months = 1.667%

to determine the total APR we must calculate compound interest for the year:

compound interest = (1 + r) ⁿ = (1 + 1.667%) ¹² = 21.9%

*compound interest refers to interest that gains interest.