Question: Problem 5 - 5 5 Effective Interest Rate ( LO 4 ) You borrow $ 1 , 0 0 0 from the bank and agree

Problem

5 - 55

Effective Interest Rate

(

4)

You borrow $

1, 000

from the bank and agree to repay the loan over the next year in

12

equal monthly payments of $

90 .

However, the bank also charges you a loan initiation fee of $

16,

which is taken out of the initial proceeds of the loan. What is the effective annual interest rate on the loan, taking account of the impact of the initiation fee?

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to

2

decimal places. Use a financial calculator or Excel.

Effective annual interest rate

Problem 5-55 Effective Interest Rate (LO4) You borrow $1,000 from the

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