A local finance company quotes a 14 percent interest rate on one-year loans. So, if you borrow RM20,000, the interest for the year will be RM2,800. Because you must repay a total of RM22,800 in one year, the finance company requires you to pay RM22,800/12, or RM1,900, per month over the next 12 months. Calculate the effective annual rate.
A local finance company quotes a 14 percent interest rate on one-year loans. So, if you borrow RM20,000, the interest for the year will be RM2,800. Because you must repay a total of RM22,800 in one year, the finance company requires you to pay RM22,800/12, or RM1,900, per month over the next 12 months. Calculate the effective annual rate.
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 19P
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Please answer it in a comprehensive and detail manner with step by step algorithm. No excel's sheet solution.
![Q3
(a)
A local finance company quotes a 14 percent interest rate on one-year loans. So, if
you borrow RM20,000, the interest for the year will be RM2,800. Because you
must repay a total of RM22,800 in one year, the finance company requires you to
pay RM22,800/12, or RM1,900, per month over the next 12 months.
Calculate the effective annual rate.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F67c4f1fa-9c53-4d6d-bc77-f68c229191b7%2Fed8e86e1-2d37-4371-bcca-66bdea6765f7%2Fyy5llfd_processed.png&w=3840&q=75)
Transcribed Image Text:Q3
(a)
A local finance company quotes a 14 percent interest rate on one-year loans. So, if
you borrow RM20,000, the interest for the year will be RM2,800. Because you
must repay a total of RM22,800 in one year, the finance company requires you to
pay RM22,800/12, or RM1,900, per month over the next 12 months.
Calculate the effective annual rate.
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