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, thebank also charges you a loan initiation fee of $18, which is taken out of the initial proceeds of the loan. What is the effective annualinterest rate on the loan, taking account of the impact of the initiation fee?Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financialcalculator or Excel.Effective annual interest rate1.49 %

Amount borrowed = $1000 Initiation fees = $18 Monthly payments = $90

Answered: You borrow $1,000 from the bank and…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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www Will 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, th bank also charges you a loan initiation fee of $25, which is taken out of the initial proceeds of the loan. What is the effective annuall interest rate on the loan, taking account of the impact of the initiation fee? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel.) Effective annual interest rate 19.98 % < Prev
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