loan is offered with monthly payments and a 10 percent APR. What’s the loan’s effective annual rate (EAR)

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter7: Using Consumer Loans
Section: Chapter Questions
Problem 7FPE: Calculating interest and APR of installment loan. Assuming that interest is the only finance charge,...
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A loan is offered with monthly payments and a 10 percent APR. What’s the loan’s effective annual rate (EAR)? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

 

Expert Solution
Step 1

Effective Annual Rate = [(1+ Annual Periodic rate /n)n] -1 

Annual Periods = 12 months 

 

 

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