Calculating the APR of a modified 0% loan using a 12% annual interest rate and a two year amortization period is shown below. The 12% interest rate was chosen so that the monthly interest charges are easier to view. The two year amortization period was selected so the complete schedule could be shown on the screen captures.

A 24 monthly payment, $18,000 loan has the first six months at zero interest and the remaining 18 months at 12%. Monthly was selected.

**QUESTION**: What is the APR because of the first six months at zero interest?

**ANSWER**: The APR is 8.49%

1.. The first step is to generate a normal amortization schedule. The interest rate will be modified inside the amortization schedule. NOTE: The interest portion of the first payment is $180 which is 1% per month. It is easy to visualize moving the decimal place two spaces to the left to arrive at $180 interest cost for a loan of $18,000. 0.01 x 18,000 = 180