Dave bought a Ford Mustang seven years ago for RM32,000. He has decided to sell it as he now needs a pick-up truck for his new business. He received RM12,000 for it from a dealer in part exchange, which means that since the price of the Ford Mustang was more than that of the pick- up truck, Dave received RM12,000 and the pick-up truck in exchange for his Ford Mustang. What was his rate of return for his transaction?

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Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.