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 14P
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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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