(i) A moneylender (i.e. loan shark) lends sums of money and charges $10 in advance per...

 

Transcribed Image Text:

(i) A moneylender (i.e. loan shark) lends sums of money and charges $10 in advance per $100 repayable one month later. What is the effective annual rate of interest? [2 marks] (ii) Another moneylender lends sums of money for 3 months at the time. For each $100 borrowed, the moneylender requires $10 interest at the start of the 3 months period, and $10 interest at the end of the 3 months, plus the principal. What is the nominal interest rate convertible half yearly? [3 marks] (i) A moneylender (i.e. loan shark) lends sums of money and charges $10 in advance per $100 repayable one month later. What is the effective annual rate of interest? [2 marks] (ii) Another moneylender lends sums of money for 3 months at the time. For each $100 borrowed, the moneylender requires $10 interest at the start of the 3 months period, and $10 interest at the end of the 3 months, plus the principal. What is the nominal interest rate convertible half yearly? [3 marks]

Answer rating: 100% (QA)

i To calculate the effective annual rate of interest for the first moneylender we need to consider the compounding effect of the 10 fee charged per 10... View the full answer