**
Appendix F to Part 1026—Optional Annual Percentage Rate
Computations for Creditors Offering Open-End Credit Plans Secured by a
Consumer's Dwelling
**

In determining the denominator of the fraction under
§ 1026.14(c)(3), no amount will be used more than once when adding
the sum of the balances subject to periodic rates to the sum of the
amounts subject to specific transaction charges. (Where a portion of
the finance charge is determined by application of one or more daily
periodic rates, the phrase "sum of the balances" shall also mean
the "average of daily balances.") In every case, the full amount
of transactions subject to specific transaction charges shall be
included in the denominator. Other balances or parts of balances shall
be included according to the manner of determining the balance subject
to a periodic rate, as illustrated in the following examples of
accounts on monthly billing cycles:

1. *Previous balance--none.*

A specific transaction of $100 occurs on the first day of the
billing cycle. The average daily balance is $100. A specific
transaction charge of 3% is applicable to the specific transaction.
The periodic rate is 11/2 % applicable to the average daily
balance. The numerator is the amount of the finance charge, which is
$4.50. The denominator is the amount of the transaction (which is
$100), plus the amount by which the balance subject to the periodic
rate exceeds the amount of the specific transactions (such excess in
this case is 0), totaling $100.

The annual percentage rate is the quotient (which is
41/2 %) multiplied by 12 (the number of months in a year),
i.e., 54%.

2. *Previous balance--$100.*

A specific transaction of $100 occurs at the midpoint of the billing
cycle. The average daily balance is $150. A specific transaction charge
of 3% is applicable to the specific transaction. The periodic rate is
11/2% applicable to the average daily balance. The
numerator is the amount of the finance charge which is $5.25. The
denominator is the amount of the transaction (which is $100), plus the
amount by which the balance subject to the periodic rate exceeds the
amount of the specific transaction (such excess in this case is $50),
totaling $150. As explained in example 1, the annual percentage rate is
31/2% × 12 = 42%.