A local finance company quotes a 16 percent interest rate on one-year loans. So, if you borrow
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A local finance company quotes a 16 percent interest rate on one-year loans. So, if you borrow $26,000, the interest for the year will be $4,160. Because you must repay a total of $30,160 in one year, the finance company requires you to pay $30,160 divided by 12, or $2,513.33, per month over the next 12 months. Is this a 16 percent loan? What rate would legally have to be quoted? What is the EAR?
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Related Book For 
Corporate Finance
ISBN: 9781259270116
8th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Roberts, Hamdi Driss
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