A discount electronics store advertises the following financing arrangement: “We don’t offer you confusing interest rates. We’ll just divide your total cost by 11 and you can pay us that amount each month for a year.” The first payment is due on the date of sale and the remaining eleven payments at monthly intervals thereafter. Calculate the effective annual interest rate the store’s customers are paying on their loans. Report your answer to the nearest two decimal places (i.e., x.xx).
A discount electronics store advertises the following financing arrangement: “We don’t offer you confusing interest rates. We’ll just divide your total cost by 11 and you can pay us that amount each month for a year.” The first payment is due on the date of sale and the remaining eleven payments at monthly intervals thereafter. Calculate the effective annual interest rate the store’s customers are paying on their loans. Report your answer to the nearest two decimal places (i.e., x.xx).
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A discount electronics store advertises the following financing arrangement: “We don’t offer you confusing interest rates. We’ll just divide your total cost by 11 and you can pay us that amount each month for a year.” The first payment is due on the date of sale and the remaining eleven payments at monthly intervals thereafter. Calculate the effective annual interest rate the store’s customers are paying on their loans. Report your answer to the nearest two decimal places (i.e., x.xx).
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