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A local finance company quotes a 14-percent interest rate on a one-year loans. So, if you borrow $10,000, you will pay a total of $11,400
A local finance company quotes a 14-percent interest rate on a one-year loans. So, if you borrow $10,000, you will pay a total of $11,400 ($100,000 * (1+0.14) = $11,400). Since coming up with $11,400 all at once might be a strain, the finance company requires you to pay $11,400/12 = $950 per month over the next 12 months. 1. What is the annual percentage rate (APR) on this loan? (2 points) 2. What is the effective annual rate (EAR)? (4 points)
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