Question

Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a...

Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a 1-year loan is quoted with an interest rate of 21.5% and you borrow $1,000, then you pay back $1,308. But you make these payments in monthly installments of $109 each.

a. What is the true APR on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel.)

b. What is the effective annual rate on the loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a...
Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a 1-year loan is quoted with an interest rate of 17.0% and you borrow $1,000, then you pay back $1,224. But you make these payments in monthly installments of $102 each. a. What is the true APR on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel.) b. What is...
Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a...
Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a 1-year loan is quoted with an interest rate of 8.5% and you borrow $1,000, then you pay back $1,164. But you make these payments in monthly installments of $97 each. a. What is the true APR on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. What is the effective annual rate on the...
This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you...
This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you see an advertisement for Crazy Judy’s Stereo City that reads something like this: “$1,000 Instant Credit! 16.9% Simple Interest! Three Years to Pay! Low, Low Monthly Payments!” You’re not exactly sure what all this means and somebody has spilled ink over the APR on the loan contract, so you ask the manager for clarification. Judy explains that if you borrow $1,000 for three years...
A local finance company quotes an interest rate of 18.1 percent on one-year loans. So, if...
A local finance company quotes an interest rate of 18.1 percent on one-year loans. So, if you borrow $39,000, the interest for the year will be $7,059. Because you must repay a total of $46,059 in one year, the finance company requires you to pay $46,059/12, or $3,838.25 per month over the next 12 months. What rate would legally have to be quoted? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places,...
Problem 5-46 EAR of Add-On Interest Loan (LG7, LG8) To borrow $1,550, you are offered an...
Problem 5-46 EAR of Add-On Interest Loan (LG7, LG8) To borrow $1,550, you are offered an add on interest loan at 8.3 percent with 12 monthly payments. Compute the 12 equal payments. (Round your answer to 2 decimal places.)      Equal payments $       Compute the EAR of the loan. (Do not round intermediate calculations and round your answer to 2 decimal places.)      EAR %  
You want to buy a new pickup for $42,854, and the finance office at the dealership...
You want to buy a new pickup for $42,854, and the finance office at the dealership has quoted you an 8.4% APR loan for 6 years of monthly payments. What is the effective annual rate on this loan? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
You want to buy a new sports coupe for $75,500, and the finance office at the...
You want to buy a new sports coupe for $75,500, and the finance office at the dealership has quoted you a loan with an APR of 7.9 percent for 72 months to buy the car. a. What will your monthly payments be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the effective annual rate on this loan? (Do not round intermediate calculations and enter your answer as a percent rounded...
Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper....
Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper. Assume the bond has a face value of $1,000, it makes semiannual interest payments, and the current date is April 15, 2019. Company (Ticker) Coupon Maturity Last Price Last Yield EST Vol (000s) IOU (IOU) 6.6 Apr 15, 2035 104.06 ??? 1,839 What is the yield to maturity of the bond? (Do not round intermediate calculations and enter your answer as a percent rounded...
Summit Record Company is negotiating with two banks for a $110,000 loan. Fidelity Bank requires a...
Summit Record Company is negotiating with two banks for a $110,000 loan. Fidelity Bank requires a compensating balance of 20 percent, discounts the loan, and wants to be paid back in four quarterly payments. Southwest Bank requires a compensating balance of 10 percent, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated rate for both banks is 8 percent. Compensating balances will be subtracted from the $110,000 in determining the available funds...
Suppose you can borrow money at 8.6% per year (APR) compounded semiannually or 8.4 per year...
Suppose you can borrow money at 8.6% per year (APR) compounded semiannually or 8.4 per year (APR) compounded monthly. Could it do with Finance calculator format? Calculate the effective annual rates. 9.00% and 8.64% (Do not round intermediate calculations) Enter your answer as a percent rounded to 2 decimal places)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT