APR or Annual Percentage Rate is the true cost of borrowing and it considers the interest and processing fees both, for calculating the cost of the loan.
Jim Tree borrowed $1,000 at 10 percent for one year.
Interest Cost = 10 % of $1000 = $100
Processing Fees = $45
Total Cost = $100 + $45 = $145
Therefore APR = 145/1000
= 14.50%
So, the APR calculated by Jim Tree was 14.5%
Hope this helps ..!!
Solution :
Given that, Jim Tree borrowed $1,000 at 10 percent for one year. He paid a $45 processing fee and $100 in interest.
Annual Percentage Rate or APR is the annual rate charged for borrowing or earned through an investment, and is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.
Jim Tree borrowed = $ 1,000
Interest rate = 10% for one year
Interest for one year = [tex] \frac{10}{100} \times 1000 = 100 [/tex]
Processing fee = $45
Total = [tex] 100+45 =145 [/tex]
APR = [tex] \frac{145}{1000} \times 100 =14.5 [/tex]%
Hence, Jim Tree calculated 14.5 % (nearest tenth) APR
