Answered step by step
Verified Expert Solution
Question
1 Approved Answer
. Suppose you go to a bank for a one year loan to pay taxes. The bank staff offers you one year loan with 5%
. Suppose you go to a bank for a one year loan to pay taxes. The bank staff offers you one year loan with 5% annual rate, flat basis and monthly repayment. The exact calculation is illustrated below.
Suppose you borrow $100, you will need to pay back: $100/N+100*r/12 every period, where N is the number of repayment (it will be 12 if it is a one year loan) and r is the quoted interest rate (in the example it is 5%). What is the effective annual interest rate?
A. 7.5% B. 8.5% C. 9.5% D. 10% E. 11.5%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started