Calculate effective annual interest rate, Finance Basics

Assignment Help:

1st bank offers you a car loan at an annual interest rate of 10% compounded monthly. What effective annual interest rate is the bank charging you? 

Solution - Calculate effective annual interest rate 

a

Rate of Interest

   

10%

b

Frequency of compunding (monthly)

12

c

Effective annual interest rate

 

10.47%

 

(1+ 10%/12)^12 - 1

     
 

The rate is divided by 12 and power is 12 as the rate

 

is annual and interest is compounded monthly.

 

 


Related Discussions:- Calculate effective annual interest rate

Money and banking course, Ask questioSay that a buyer of bonds values good ...

Ask questioSay that a buyer of bonds values good bonds at $500 and values bad bonds at $250. Sellers of both good and bad bonds value them at $350. If the fraction of good sellers

A. michael spence, A. Michael Spence An American economist who was awar...

A. Michael Spence An American economist who was awarded by the Nobel Memorial Prize in Economic Sciences. Spence is a lecturer of management at Stanford University in the Gradu

Inventory turnover, Ask question #MinimQuestion You are the financial acc...

Ask question #MinimQuestion You are the financial accountant of Donald Bhd, a manufacturer and wholesaler of soft drinks. Donald Bhd is in direct competition with Fizz Bhd and Po

What are the characteristics of an efficient market, What are the character...

What are the characteristics of an efficient market? The word market efficiency refers to the speed, ease, and cost of trading securities. In a well-organized market, securitie

Explain the operations of indian stock market, Explain the Operations of In...

Explain the Operations of Indian Stock Market. Meaning of Stock Exchange: Stock exchange means an organized market where securities issued by government organizations, compan

Estimate the economic rate of return, Production data has been fit to a Fet...

Production data has been fit to a Fetkovich type curve. Given the following information, answer the questions: Date of first production plotted for the Fetkovich type curve matc

Market segmentation theory, Market Segmentation Theory This theory sta...

Market Segmentation Theory This theory states as the main investors lenders and borrowers are confined to a particular segment of the market and will not change even whether t

What is the objectives of listing, What is the Objectives of Listing ...

What is the Objectives of Listing Objectives of listing are mainly to: (i) Provide liquidity to securities. (ii) Mobilize savings for economic growth. (iii) Protect

Setting of optimal cash balance, Setting of Optimal Cash Balance Cash ...

Setting of Optimal Cash Balance Cash is often identified like a non-earning asset since holding cash quite than a revenue-generating asset includes a cost in form of foregone

Commercial banks - banking institutions, Commercial Banks - Banking Institu...

Commercial Banks - Banking Institutions These are financial institutions such accept deposits of money from the universal public, safeguard the deposits and create them availa

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd