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, thebank also charges you a loan initiation fee of $18, which is taken out of the initial proceeds of the loan. What is the effective annualinterest 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 financialcalculator or Excel.Effective annual interest rate1.49 %

Amount borrowed = $1000 Initiation fees = $18 Monthly payments = $90

Answered: You borrow $1,000 from the bank and…

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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