Bart is an engineering graduate who did not take the engineering economy elective during his B.S. degree course work. After working for a year or so, he found himself in financial trouble, and he borrowed $500 from a friend in the finance department at his office. Bart agreed to repay the loan principal plus $75 interest 1 month later. The two got separated doing different jobs, and 1 year went by. The friend e-mailed Bart after exactly 1 year and asked for the loan repayment plus the interest with monthly compounding, since Bart had made no effort to repay the loan during the year. (a) What does Bart now owe his friend? (b) What effective annual interest rate did Bart pay on this $500 loan?
Bart is an engineering graduate who did not take the engineering economy elective during his B.S. degree course work. After working for a year or so, he found himself in financial trouble, and he borrowed $500 from a friend in the finance department at his office. Bart agreed to repay the loan principal plus $75 interest 1 month later. The two got separated doing different jobs, and 1 year went by. The friend e-mailed Bart after exactly 1 year and asked for the loan repayment plus the interest with monthly compounding, since Bart had made no effort to repay the loan during the year. (a) What does Bart now owe his friend? (b) What effective annual interest rate did Bart pay on this $500 loan?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Bart is an engineering graduate who did not take the engineering economy elective
during his B.S. degree course work. After working for a year or so, he found himself in
financial trouble, and he borrowed $500 from a friend in the finance department at his
office. Bart agreed to repay the loan principal plus $75 interest 1 month later. The two
got separated doing different jobs, and 1 year went by. The friend e-mailed Bart after
exactly 1 year and asked for the loan repayment plus the interest with monthly
compounding, since Bart had made no effort to repay the loan during the year.
(a) What does Bart now owe his friend? (b) What effective annual interest rate did Bart
pay on this $500 loan?
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