Question 6 [15 points] The APR formula in Chapter 5 does not apply to an amortized loan. Explain why. (Note: you may use an example or examples to supplement your explanation.) [15 points]

Annual Percentage Rate (APR) Percentage cost of credit on a yearly basis r=P(N+1)2nI where r= Approximate APR n= Number of payment periods in one year (12, if payments are monthly; 52 , if weekly) I= Total dollar cost of credit P= Principal, or net amount of loan N= Total number of payments scheduled to pay off the loan Annual Percentage Rate (APR) Percentage cost of credit on a yearly basis r=P(N+1)2nI where r= Approximate APR n= Number of payment periods in one year (12, if payments are monthly; 52 , if weekly) I= Total dollar cost of credit P= Principal, or net amount of loan N= Total number of payments scheduled to pay off the loan