A local finance company quotes a 16 percent interest rate on one-year loans. So, if you borrow
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A local finance company quotes a 16 percent interest rate on one-year loans. So, if you borrow $25,000, the interest for the year will be $4,000. Because you must repay a total of $29,000 in one year, the finance company requires you to pay $29,000/12, or $2,416.67, per month over the next 12 months. Is this a 16 percent loan? What rate would legally have to be quoted? What is the effective annual rate?
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Related Book For 
Fundamentals of corporate finance
ISBN: 978-0073382395
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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