Calculate effective annual interest rate, Finance Basics

Assignment Help:

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.

 

 


Related Discussions:- Calculate effective annual interest rate

Investment bank, Investment Bank A lending entity is engaged in all the...

Investment Bank A lending entity is engaged in all the phases of privacy offerings the including managing, underwriting, trading, and the distributing new security issues.

Ba 207, on may 1, counts, inc has a balance of $1000 in office supplie. dur...

on may 1, counts, inc has a balance of $1000 in office supplie. during may the company buys $500 more of the office supplies. on may 31 the company counts the supplies and finds 20

How capital budgeting decisions affect a company’s value, Give an example o...

Give an example of how capital budgeting decisions affect a company's value, strategy or operations. Companies always tend to look for capex projects which will add value to

Differences between an ordinary annuity and an annuity due, 1. Describe the...

1. Describe the similarities and differences in between an ordinary annuity, an annuity due, and perpetuity.  Provide a methodical answer, including examples to demonstrate your po

Captive insurance, discuss the meaning and advantage of captive insurance

discuss the meaning and advantage of captive insurance

Five common mistakes in capital budgeting, Please list five common mistakes...

Please list five common mistakes in capital budgeting that could either overstate or understate the value of a project.Bonus: explain the relationship between the errors above and

Stock exchange index or sei, Stock Exchange Index or SEI Stock Exchang...

Stock Exchange Index or SEI Stock Exchange Index is a measure of relative changes in prices of stocks from one duration to another index. Nairobi Stock Exchange twenty (20) -

Describe the transaction structure-financing, Description of the deal, anal...

Description of the deal, analysis of abnormal returns & premium (a)  Describe the transaction structure, mode of payment, and financing.  (b) Give your comment/assessment of

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd