Banks sometimes quote interest rates in the form of add-on interest. In this case, if a 1-year
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Question:
Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a 1-year loan is quoted with an interest rate of 9.5% and you borrow $1,000, then you pay back $1,284. But you make these payments in monthly installments of $107 each.
A. What is the true APR on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel.)
APR______%
B. What is the effective annual rate on the loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Effective Annual Rate_____%
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0078034640
7th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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