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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Question
A man approaches a Loan Agency for P100,000 to be paid in 24 monthly instalments. The agency advertises an interest rate of 1.5% per month. They proceed to calculate the amount of his monthly payment as follows:
Amount requested P100,000
Credit investigation P500
Credit risk insurance P1,000
Total P101,500
Interest = P101,500(24)(0.015) = P36,540
Total owed = P36,540 + P101,500 = P138,040
Payment = P138,040 / 24 = P5,751.67
What is the effective rate of interest of the loan?
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