EXAMPLE 2-A.8 (Flat Rate and APR) From the undermentioned facts, develop the repayment schedule for the three consumer financing schemes (A), (B) and (C) using the flat rate of interest. Also, compute the effective rate of interest (APR) Using both long and short-cut approaches.
• Loan amount. Rs 2.40.000
• Repayment period, 3 years
• Rate of interest (flat), 6 per cent
• Repayment pattern: Scheme (A),loan to be repaid in three equal installments; Scheme (B), loan with interest to be paid in three equated annual installments; and Scheme (C), loan with interest to be repaid in three equal installments.
where i = APR
F = flat rate
n = total number of repayments
m = number of repayments per unit of time
Substitution the values. the APR = 9.7 per cent.