You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly payments of $90. However, the bank also charges you a loan initiation fee of $18, which is taken out of the initial proceeds of the loan. What is the effective annual interest rate on the loan, taking account of the impact of the initiation fee? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel. Effective annual interest rate 1044 %
You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly payments of $90. However, the bank also charges you a loan initiation fee of $18, which is taken out of the initial proceeds of the loan. What is the effective annual interest rate on the loan, taking account of the impact of the initiation fee? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel. Effective annual interest rate 1044 %
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:Problem 5-55 Effective Interest Rate (LO4)
You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly payments of $90. However, the
bank also charges you a loan initiation fee of $18, which is taken out of the initial proceeds of the loan. What is the effective annual
interest rate on the loan, taking account of the impact of the initiation fee?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial
calculator or Excel.
Effective annual interest rate
10.44 %
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