Banks sometimes quote interest rates in the form of add-on interest. In this case, if a 1
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Banks sometimes quote interest rates in the form of "add-on interest." In this case, if a 1 -year loan is quoted with a 20% interest rate and you borrow $ 1,000, then you pay back $1,200. But you make these payments in monthly installments of $100 each.
a. What is the true APR on this loan?
b. What is the effective annual rate on the loan?
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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