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

Working Capital, AsStudents will analyze and synthesize the financial repor...

AsStudents will analyze and synthesize the financial reports of an organization of their choice and present their findings in a PowerPoint presentation (with completed Notes sectio

Percentage of sales method, Percentage of Sales Method A) Express the...

Percentage of Sales Method A) Express the various balance sheet items varying along with sales as percentage of sales as assume for year 2002 stock and net fixed assets amoun

Profit maximization - objectives of business entity, Profit maximization - ...

Profit maximization - Objectives of Business Entity Conventionally, this was considered to be the main goal of the firm. Profit maximization refers to getting the highest poss

Plastic money or credit card finance, Plastic Money or Credit Card Finance ...

Plastic Money or Credit Card Finance This is finance of a kind whereby a company will make arrangements for the use of the services of credit card organizations via the purcha

Homework, the two problems below (P1 and P2). Five marks each. Part marks w...

the two problems below (P1 and P2). Five marks each. Part marks will be allocated, but if you have the incorrect answer then you cannot expect to get more than half marks. Project

Draw a graph and use the supply and demand analysis, If banks expect an unu...

If banks expect an unusually large increase in withdraws from checking deposit accounts in the near future, what would happen to the federal funds rate, borrowed reserves and nonbo

Risk adjusted discounting rate – methods of computing cost, Risk Adjusted D...

Risk Adjusted Discounting Rate - Methods of Computing Cost of Capital This method is used to establish the discounting rate to be used for a provided project. The cost of capi

Asset based valuation, Asset Based Valuation  This method acquires int...

Asset Based Valuation  This method acquires into account the entire business along with reference to its assets and then divides the resultant value via the number of shares i

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