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 


Rate of Interest




Frequency of compunding (monthly)



Effective annual interest rate




(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
Profitability Index or P.I. P.I. (benefit-cost ratio) = Present value of inflows / Present value of cash outlay Whether P.I. is greater than 1.0, invest and whereas less th

Uses and Application of Ratios Ratios are required in the following ways via managers in different firms. 1. Evaluating the efficiency of assets employment to generate sale

Question: Unsatisfactory control of spare parts in a particular mechanical workshop is resulting in high carrying costs for some items and high stock-out costs for others. A st

Preparing Contract Note in the Stock Exchange Clerk takes the details of the day's transaction to the broker at the end of working day. Broker scrutinizes all transactions o

Setting a Reorder Point - ROP  Once the order quantity has been determined, the next question to be settled is when to place the order. If an order is released and it takes th

The organization performed very well during the last year and generated profit in each segment. In the food and beverage segment, the company has made 30% net profit and in rooms a

Classification of Preference Share Capital i) Redeemable Class Redeemable preferential shares are bought back via Issue Company after minimum redemption duration however

Example of NPV Method Resolution limited intends to purchase a machine worth Shs.1, 500,000 that will have a residue value Shs.200,000 after 5 years helpful life. The saving

In the present case, we need to take a decision about implementing one of the available two options, based on various factors. The available two options are either to complete a se

Collection Policy The firm's collection policy may affect also our study.  The higher the cost of collecting accounts obtainable the lower the bad debt losses.  Therefore the