Question

Question 16 4 pts Compute the APR of the following loan: I borrow two thousand dollars for 5 years from a lender who charges me 9% simple interest, but imposes a $80 loan origination fee. The loan will be repaid in one lump sum at the end of the five year period. APR = __% (enter as a percentage, one decimal point, no percentage sign)

Answer 1

Loan Amount = $ 2000

Number of years = 5

Interest rate = 9%

Simple Interest = Loan amount * rate * time

= $ 2000 * 9% * 5

= $ 900

APR = ((Interest + Origination Fee)/Loan Aamount)*365/n*100

where,

n = number of days in loan term = 5*365 = 1825 days

= (($ 900 + $ 80)/ $2000) * 365/ 1825 * 100

= 9.80% p.a.