COMPUTATION ANNUAL PERCENTAGE RATE

let’s say that you were to take out a loan of $10,000 at 10% interest, with a term
of 10 years that will be paid back at the end of the term. That would make your
annual interest expenses $1,000 per year. Let’s also assume your bank has
included fees associated with the loan totaling $500. To get the APR of this loan,
you need to add the cost of the fees to the total amount in interest paid. Spread
across a 10 year period, the additional $500 charge is divided by 10, which is $50
per year. $50 is 0.5% of the $10,000 loan, adding 0.5% to the annual percentage
rate. Therefore, the annual percentage rate is 10% + 0.5% = 10.5%.
FORMULA:

GIVEN:
Loan Principal: 10,000
Interest Rate: 10% (10/100=0.1) 10,000 x 0.1 = 1,000 X 10YEARS = 10,000
N : no of days : 10years x 365 = 3,650
Fee : 500

SOLUTION:

APR = (500 + 10,000) x 365) x 100

__10,000___
3,650

APR = (10,500) x 365 x 100

_10,000_
3,650

APR = (1.05) x 365 x 100

_3650_

APR = 38,325
3,650

APR = 10.5%