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A loan of $3,000 for a new, high-end laptop computer is to be repaid in 15 end-of-month payments (starting one month from now). The monthly payments are determined as follows.

Loan principal .......................................... $3,000

Interest for 15 months at

1.5% per month ......................................... 675

Loan application fee .................................... 150

Total ...................................................... $3,825

Monthly payment = $3,825/15 = $255

What nominal and effective interest rates per year are actually being paid? Hint: Draw a cash-flow diagram from the perspective of the lender

Loan principal .......................................... $3,000

Interest for 15 months at

1.5% per month ......................................... 675

Loan application fee .................................... 150

Total ...................................................... $3,825

Monthly payment = $3,825/15 = $255

What nominal and effective interest rates per year are actually being paid? Hint: Draw a cash-flow diagram from the perspective of the lender

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