Annual Percentage Rate

Explain this!

Junior Member
Joined
Feb 7, 2019
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145
The cash price for an air condition is $150.00. The installment price is $170.10, payable in 18 equal monthly payments. What annual percentage rate is paid by the installment purchaser?
The amount financed per $100.00 is $20.10 divided by $150.00 multiplied by $100.00. The amount is $13.40. This amount is needed to determine the finance charge.

The answer is 16.25%, This percentage is found by using an APR table. My question is as follows:

How can the APR of 16.25% be determined by using a calculation?
 

JeffM

Elite Member
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Sep 14, 2012
Messages
6,484
It can’t. It can be approximated using numerical methods, which is how your table is constructed.
 

Explain this!

Junior Member
Joined
Feb 7, 2019
Messages
145
It can’t. It can be approximated using numerical methods, which is how your table is constructed.
Do all APR tables use the same calculation method, or does each table us a different method?
 

Subhotosh Khan

Super Moderator
Staff member
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Jun 18, 2007
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Do all APR tables use the same calculation method, or does each table us a different method?
Those tables "most probably" use the same method - but - that method cannot be reduced to simply evaluating some algebraic expression.
 

JeffM

Elite Member
Joined
Sep 14, 2012
Messages
6,484
Numerical methods are sophisticated methods of trial and error. They differ primarily in how many calculations are required to get a good approximation.
 
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