The Get-Rich-Quick loan company offers a 10 % loan. You need to borrow $1000 and the...

 

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The Get-Rich-Quick loan company offers a "10 % loan". You need to borrow $1000 and the deal you are offered is the following: you pay $1100 ($1000 plus the $100 interest) in 11 equal $100 monthly amounts starting one month from today. In addition, there is a $25 administration fee for the loan, payable immediately, and a processing fee of $10 with each payment. Furthermore, there is a $20 non-optional closing fee to be included in the last payment. Recognizing fees as a form of interest payment, what is: a) the total amount of interest and fees paid over the life of the loan? b) the effective monthly interest rate? c) the nominal (annual) interest rate? d) the effective annual rate? The Get-Rich-Quick loan company offers a "10 % loan". You need to borrow $1000 and the deal you are offered is the following: you pay $1100 ($1000 plus the $100 interest) in 11 equal $100 monthly amounts starting one month from today. In addition, there is a $25 administration fee for the loan, payable immediately, and a processing fee of $10 with each payment. Furthermore, there is a $20 non-optional closing fee to be included in the last payment. Recognizing fees as a form of interest payment, what is: a) the total amount of interest and fees paid over the life of the loan? b) the effective monthly interest rate? c) the nominal (annual) interest rate? d) the effective annual rate?

Answer rating: 100% (QA)

Lets break down the loan terms step by step to calculate the total amount of interest and fees paid over the life of the loan the effective monthly in... View the full answer