Here is a short example of how to calculate the APR and see how it differs from normal interest rates:
Loan Amount (P) =
$100
Additional Cost (E) =
$5
Interest Rate (I) =
12%
Monthly Interest Rate (r) =
R/100*12=0.01
Number of month (n) =
1
Now, applying Newton-Raphson Method, we get an APR (A) =0.0605*1200=72.60%
From the above calculation, we see that for a loan amount of $100 with 12% interest, the APR can be as high as 72.60%, depending upon the extra costs and the time taken for repayment.
The calculation is very confusing. The calculator in this page makes that easier and faster.
