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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

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Calculating the Return On A Loan

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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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