A local finance company quotes a 12 percent interest rate on one-year loans. So, if you borrow $30,000, the interest for the year will be $3,600. Because you must repay a total of $33,600 in one year, the finance company requires you to pay $33,600/12, or $2,800.00, per month over the next 12 months. a.What rate would legally have to be quoted? b.What is the effective annual rate?

A local finance company quotes a 12 percent interest rate on one-year loans. So, if you borrow $30,000, the interest for the year will be $3,600. Because you must repay a total of $33,600 in one year, the finance company requires you to pay $33,600/12, or $2,800.00, per month over the next 12 months. a.What rate would legally have to be quoted? b.What is the effective annual rate?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

See similar textbooks

Similar questions

Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $30,000, the interest for the year will be $5,100. Because you must repay a total of $35,100 in one year, the finance company requires you to pay $35,100/12, or $2,925.00, per month over the next 12 months. a. What rate would legally have to be quoted? b. What is the effective annual rate?
A local finance company quotes a 17% Interest rate on one-year loans. So, if you borrow $25.000, the interest for the year will be $4,250. Since you must repay a total of $29.250 in one year, the finance company requires you to pay $29,250/12, or $2.43750, per month over the next 12 months. Is this a 17% loan? What rate would legally have to be quoted? (Do not round intermediate calculations. Round the final answer to 2 decimal places) Annual percentage rate 1% What is the effective annual rate? (De not round intermediate calculations. Round the final answer to 2 decimal places) Effective annual rate
A local finance company quotes a 12 percent interest rate on one-year loans. So, if you borrow $40,000, the interest for the year will be $4,800. Because you must repay a total of $44,800 in one year, the finance company requires you to pay $44,800/12, or $3,733.33, per month over the next 12 months. a. What rate would legally have to be quoted? Annual percentage rate 21.46% b. What is the effective annual rate? 23.70% Effective annual rate
A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $23,000, the interest for the year will be $3,910. Because you must repay a total of $26,910 in one year, the finance company requires you to pay $26,910 divided by 12, or $2,242.50, per month over the next 12 months. Is this a 17 percent loan? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) What rate would legally have to be quoted? Annual percentage rate % What is the EAR? Effective annual rate %
A local finance company quotes an interest rate of 17.2% on one-year loans. So, if you borrow $25,000, the interest for the year will be $4,300. Because you must repay a total of $29,300 in one year, the finance company requires you to pay $29,300/12, or $2,441.67 per month over the next 12 months. What is the effective annual rate?
A local finance company quotes an interest rate of 16.7 percent on one-year loans. So, if you borrow $25,000, the interest for the year will be $4,175. Because you must repay a total of $29,175 in one year, the finance company requires you to pay $29,175/12, or $2,431.25 per month over the next 12 months. Is the interest rate on this loan 16.7 percent? What rate would legally have to be quoted? What is the effective annual rate?
Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discount interest loan). Also, assume that the bank requires you to maintain a compensating balance equal to 10 percent of the initial loan value. What effective annual interest rate are you being charged?
Suppose you take out a 36-month installment loan to finance a delivery van for $26,100. The payments are $987 per month, and the total finance charge is $9,432. After 25 months, you decide to pay off the loan. After calculating the finance charge rebate, find your loan payoff (in $). (Round your answer to the nearest cent.) $ 8938.537
Suppose you borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also, assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial loan value What effective annual interest rate are yo being charged
Suppose you take out a 36-month installment loan to finance a delivery van for $26,100. The payments are $987 per month, and the total finance charge is $9,432. After 25 months, you decide to pay off the loan. After calculating the finance charge rebate, find your loan payoff (in $).
You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly payments of $90. However, the bank also charges you a loan initiation fee of $20 which is taken out of the initial proceeds of the loan. Taking into account the impact of the initiation fee, what is the effective annual interest rate on the loan?