Question

Round any decimals to the nearest penny.
Secured Unsecured
Credit APR APR
Excellent 4.75% 5.50%
Good 5.00% 5.90%
Average 5.85% 6.75%
Fair 6.40% 7.25%
Poor 7.50% 8.40%

Use the table above for interest rate questions.
How much more interest do your parents have to pay at the end of the first month because their rating is good rather than excellent?

Answer 1

I don't know the loan amount or whether it's secured or unsecured. The extra interest for the first month equals

extra = principal × (APR_good − APR_excellent) / 12.

Using the table differences:
- Secured: 5.00% − 4.75% = 0.25% = 0.0025 annually → monthly = 0.0025/12.
- Unsecured: 5.90% − 5.50% = 0.40% = 0.0040 annually → monthly = 0.0040/12.

Per $1,000 borrowed that gives:
- Secured: 1,000 × 0.0025/12 = $0.2083 → $0.21 (nearest penny).
- Unsecured: 1,000 × 0.0040/12 = $0.3333 → $0.33 (nearest penny).

Tell me the principal and whether the loan is secured or unsecured and I will compute the exact dollar amount.