Question
Banks sometimes quote interest rates in the form of add-on interest. In this case, if a 1-year loan is quoted with a 6% interest rate
Banks sometimes quote interest rates in the form of "add-on interest." In this case, if a 1-year loan is quoted with a 6% interest rate and you borrow $12,000, then you pay back $12,720 (=$12,0001.06). However, you make these payments in monthly installments of $1,060 (= $12,720/12) each.
a. What is the true APR on this loan?
b. What is the effective annual rate on the loan?
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The Changing Geography Of Banking And Finance
Authors: Pietro Alessandrini ,Michele Fratianni ,Alberto Zazzaro
1st Edition
1441947205, 978-1441947208
