A local finance company quotes a 14 percent interest rate on one-year loans. So, if you borrow $20,000, the interest for the year will be $2,800. Because you must repay a total of $22,800 in one year, the finance company requires you to pay $22,800/12, or $1,900.00, per month over the next 12 months. a. What rate would legally have to be quoted? Annual percentage rate 24.91% b. What is the effective annual rate? Effective annual rate 27.96%

A local finance company quotes a 14 percent interest rate on one-year loans. So, if you borrow $20,000, the interest for the year will be $2,800. Because you must repay a total of $22,800 in one year, the finance company requires you to pay $22,800/12, or $1,900.00, per month over the next 12 months. a. What rate would legally have to be quoted? Annual percentage rate 24.91% b. What is the effective annual rate? Effective annual rate 27.96%

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Description: A local finance company quotes a 14 percent interest rate on one-year loans. So, if youborrow $20,000, the interest for the year will be $2,800. Because you must repay a totalof $22,800 in one year, the finance company requires you to pay $22,800/12

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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