Solve the Problem

question 76

Multiple Choice

Solve the problem. Use the approximate APR formula to estimate the APR, and round rates to the nearest tenth of a percent.
-Jordan wants to buy an electric guitar for $320. The music store offers to let him buy it on credit, paying only $11.14 per month for 33 months. What is the finance charge? What is the approximate annual percentage rate?

• A)$58.76, 12.9%
• B)$42.76, 10.8%
• C)$47.62, 10.5%
• D)$36.48, 8.3%

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Definitions:

Net Present Value

A financial analysis method used to determine the value of an investment by calculating the present value of its future cash flows.

Straight-Line Depreciation

An approach for assigning the financial outlay of a concrete asset throughout its service life in uniform annual segments.

Capital Budgeting

The process of allocating resources for significant capital, or investment, expenditures in the long term.

Discount Factor

A multiplier used in discounted cash flow (DCF) analysis to calculate the present value of future cash flows.