## Business math: credit/APR

Jack has been shopping for a loan to buy a new car. He wants to borrow $18,000 for four or five yrs. Jack's credit union offers a simple-interest loan at 9.1 percent for 48 months, resulting in a a monthly payment of$448.78. The credit union does not offer 5-year auto loans for amounts less than $20,000, however. If Jack borrowed$18,000, this payment would strain his budget. A local bank offered him a five-year loan at 9.34 percent APR, with a monthly paymeny of $376.62. This credit would not be a simple-interest loan. Because Jack is not a depositor in the bank, he would also be charged a$25 credit check fee and a \$45 application fee. Jack likes the lower payment but knows that the APR is the true cost of credit, so he decided to cofirm the APRs for both loans before making the decision.

a) What is the APR for the credit union loan?

b) Use the n-ratio formula to confirm the APR on the bank loan. n(n+n)/2

c) By how much would Jack lower the APR on the bank loan if he opened an account to avoid the credit check and application fee?