You are taking out a single-payment loanthat uses the discount methodto compute the finance charges. Computing the finance charges is done the way they're computed using the simple interest method. Under the discount method, a borrower receives the principal the finance charges. For example, if the principal is $8,000 and the finance charges are $720, the borrower will receive $ .

The following equation computes the finance charges on your loan:

Fd= Fs= P r t

In the equation, Fdis the finance charge for the loan. What are the other values?

Pis the amount of the loan.

ris the stated rate of interest.

tis the term of the loan in .

You're borrowing $6,000 for a year and a half with a stated annual interest rate of 6%. Complete the following table. (Note: Round your answers to the nearest dollar.)

Principal	$6,000
Finance charges
Loan disbursement
Total payback

Annual Percentage Rate (APR)

You also want to calculate the APR(annual percentage rate) and compare it to the stated interest rate.

APRAPR

==

AverageAnnualFinanceChargeAverageLoanBalanceOutstandingAverageAnnualFinanceChargeAverageLoanBalanceOutstanding

First, compute the average annual finance charge by dividing the total finance charge of

by the life of the loan, which is a year and a half (1.5 years) =

(Note: Round your answers to the nearest dollar.)

Next, as a single-payment loan, the average loan balance outstanding is constant at the , in this case,

.

Complete the calculation. (Note: Round your answers to the nearest dollar and your percentage point to the nearest twodecimal places.)

APR	=	Average Annual Finance Charge / Average Loan Balance Outstanding
	=	/
	=	%

The APR is the stated interest rate because the

Term of the loan is more than six months

Loan is a single-payment loan

Formula to compute finance charges is the same for the discount and simple interest methods

Discount method was used to calculate finance charges

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Answer Okay lets solve this problem stepbystep Given information Principal P 6000 Stated annual inte... View the full answer