A local finance company quotes an interest rate of 15.6 percent on one- year loans. So, if you borrow $36,000, the interest for the year will be $5,616. Because you must repay a total of $41,616 in one year, the finance company requires you to pay $41,616/12, or $3,468.00 per month over the next 12 months. a. What rate would legally have to be quoted? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the effective annual rate? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. APR b. EAR % %
A local finance company quotes an interest rate of 15.6 percent on one- year loans. So, if you borrow $36,000, the interest for the year will be $5,616. Because you must repay a total of $41,616 in one year, the finance company requires you to pay $41,616/12, or $3,468.00 per month over the next 12 months. a. What rate would legally have to be quoted? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the effective annual rate? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. APR b. EAR % %
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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Transcribed Image Text:A local finance company quotes an interest rate of 15.6 percent on one-
year loans. So, if you borrow $36,000, the interest for the year will be
$5,616. Because you must repay a total of $41,616 in one year, the finance
company requires you to pay $41,616/12, or $3,468.00 per month over the
next 12 months.
a. What rate would legally have to be quoted?
Note: Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g., 32.16.
b. What is the effective annual rate?
Note: Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g., 32.16.
a. APR
b. EAR
%
%
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