Q:

Jim Tree borrowed $1,000 at 10 percent for one year. He paid a $45 processing fee and $100 in interest. He calculated the APR to the nearest tenth. What was the APR?

Accepted Solution

A:
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 = $100Processing Fees = $45Total Cost = $100 + $45 = $145Therefore APR = 145/1000= 14.50%So, the APR calculated by Jim Tree was 14.5%Hope this helps ..!!