SOLUTION: Effective Annual Rate: a loan is offered with monthly payments and a 10% APR. what is the loan's effective annual rate?
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Question 1064344: Effective Annual Rate: a loan is offered with monthly payments and a 10% APR. what is the loan's effective annual rate?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
to get the effective annual rate, you do the following:
nominal interest rate is 10 percent.
that's the same as an annual interest rate of.10 when expressed as a decimal.
divide that by 12 to get a monthly interest rate of 1.0083333.....
add 1 to that to get 1.0083333333.......
raise that to the 12th power to get 1.0083333333.....^12 = 1.104713067
subtract 1 from that and multiply it by 100 to get 10.4713067 percent.
the nominal annual rate is 10 percent.
the effective annual rate is 10.4713067 percent.
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