Annual Percentage Rate(APR)

This video will tech you how to find APR by using the APR formula.

Okay let’s talk about annual percentage date well you see this most probably if you have a credit card right so you see if you are many you know credit card offers zero percentage here some credit card offers five percent a year ten percent a year and so on and so on or some credit card actually over zero percent then after two years they are you know increasing

Dramatically actually you know there’s agreement so you have to read the agreement actually so there’s a 26 percent fear so well we have to be very careful about dealing with those credit card terms and condition otherwise you’re going to be you know losing a lot of money so well annual percentage rate we have a formula actually f here is approximately can be

Calculated by two times number of famines times the rate divided by number of payments plus one there you go there is a plus one here okay plus 1. all right so what is which one means what so n is number payment number of months monthly payment and r is the rate and n is the same thing is number of month number of m1 month okay so we just calculate if it is

Given a year we must convert into monthly then we just substitute and of course if we are always you convert to percentage well which is straightforward if you have a calculator handy you can use it so let’s take a look here how can we actually solve the problem for apr so they clearly say find the f here rounded to the nearest tenth okay of the person for the

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First of the living room set of that much dollar a 12 percent excellent interest and three years right away i have my fear formula a pr is approximately 2 times n by the way n is 3 times 12 which is 36 times the rate which is 12 percent so 12 over n is same 36 remember you don’t have to do it one more time well don’t need this parentheses here okay plus one

By default so all i do i just plug this in into the calculator okay so let’s take a look here so i can press this n over d 2 times 36 times 12 percent and go down 36 plus 1 enter and of course you’re going to have some fraction we don’t need a fraction we want a decimal so you clearly see it gives you like point 23 well we’re gonna go actually three decimal

Places here or you know what you multiply 100 right or multiply by 100 and we can now say 23.4 percent remember we must round it up okay 23.4 percent so approximately 23.4 percent remember we must multiply with decimal you convert it to percentage so we move the decimal multiplied by 100 okay so again what i mean it was like that zero point two three 3 5 so

Then you move the decimal 1 2 to the right which is 23 point of course you round to the 10th because they make sure they already say 10 plus so that’s 23.4 percent that’s how you actually work it out on this problem okay now let’s take a look at another one so we are checking out this one here what is given so they give you the interest rate they give you the

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Interest rate and they give you the number of years that is nice enough well what do we do with this one this is to confuse you actually again i want to make sure that we don’t get confused here even this one was here right okay so yeah this one is just to confuse you you don’t even pay attention with that one okay because formula we need number of m and t and

R actually to deal with this problem okay to find the f here all right so if here if he are annual percentage rate approximately 2 n r over n plus 1 so i’ll let’s substitute it so 2 times n in this case well of course i’m going to substitute everything here so better i open a parenthesis plus 1 okay so n where is my n four years so my four years four times

Twelve so my n is forty eight so that’s forty eight and r is fourteen percent i just put down fourteen percent because we have a calculator handy or if you don’t have a calculator you can convert into decimal moving to the left and that should give you the same 48 here also plus one okay so now we are ready to use our calculator actually there you go so if you

Do use our calculator i can do the same thing n over d 2 times 48 times 14 percent going down 48 plus 1 enter again it gives you the fraction of course obviously you don’t need fraction and we multiply by 100 multiply 100 and 27.4 percent this one is 27.4 percent 27.4 percent is the fear a v r so that’s how we work it out this kind of problem and i hope you understand thank you

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Transcribed from video
Annual Percentage Rate(APR) By MK Learningcenter