Calculate effective annual interest rate, Finance Basics

1st bank offers you a car loan at an annual interest rate of 10% compounded monthly. What effective annual interest rate is the bank charging you? 

Solution - Calculate effective annual interest rate 

a

Rate of Interest

   

10%

b

Frequency of compunding (monthly)

12

c

Effective annual interest rate

 

10.47%

 

(1+ 10%/12)^12 - 1

     
 

The rate is divided by 12 and power is 12 as the rate

 

is annual and interest is compounded monthly.

 

 

Posted Date: 7/23/2012 2:10:32 AM | Location : United States







Related Discussions:- Calculate effective annual interest rate, Assignment Help, Ask Question on Calculate effective annual interest rate, Get Answer, Expert's Help, Calculate effective annual interest rate Discussions

Write discussion on Calculate effective annual interest rate
Your posts are moderated
Related Questions
Do you guys provide Cost of Debentures assignment help. I need writing a report on Cost of Debentures and it is about 2000 words. Let me know. I need to buy your solution.

system integration and infrastructure development is the

Government - Measuring Business Performance Government The Government is interested particularly in utility companies as KPLC, KPTC and such will offers public services -

Three of these companies have bonds that carry investment - grade ratings. The other 3 companies carry junk - bond ratings. Judging by the information in the table, which 3 compani

Five years ago, you bought a house for $151,000, with a down payment of $30,000, which meant you took out a loan for $121,000. Your interest rate was 5.75% fixed. You would like to

Compute the risk premium for the stock of Omega Tools if the risk free rate is 6%, the expected market return is 12%, and Omega's stock has a beta of .8.    Ome

Question 1: a) What is dependency ratio and why is it important for pensions? b) For which types of schemes is dependency ratio mostly relevant? Explain c) What is the

Interpolation method Consequently, r denotes required rate of return Consequently, r = 14 percent + (15 percent - 14 percent) x 253 .646 /253 .646 + 5.375

Company XYZ stock is considering the two new projects, Project A and Project B. The two projects have similar risk characteristics as the existing business. The managers forecast t

Business Ethics - Objectives of Business Entity Connected to the question of social responsibility is the matter of business ethics.  Ethics are explained as the "standards of