A local finance company quotes an interest rate of 16.5 percent on one-year loans. So, if you borrow $25,000, the interest for the year will be $4,125. Because you must repay a total of $29,125 in one year, the finance company requires you to pay $29,125/12, or $2,427.08, per month over the next 12 months. Is the interest rate on this loan 16.5 percent? What rate would legally have to be quoted? What is the effective annual rate?
Online Tutoring, Online Tutors
Wednesday 31 January 2018
A local finance company quotes an interest rate of 16.5 percent on one-year loans. So, if you borrow
A local finance company quotes an interest rate of 16.5 percent on one-year loans. So, if you borrow $25,000, the interest for the year will be $4,125. Because you must repay a total of $29,125 in one year, the finance company requires you to pay $29,125/12, or $2,427.08, per month over the next 12 months. Is the interest rate on this loan 16.5 percent? What rate would legally have to be quoted? What is the effective annual rate?
