Lab 4 Question 3 – Finanace question regarding effective monthly rate and effective annual rate- please read?
Below is the question- I just cant seem to figure out how to show for the rates given below as solution using a BA II calculator or any other financial calculator. Does anyone know how to solve for the rates using a calculator?
A local finance company quotes a 10 percent interest rate on one-year loans. So, if you borrow $30,000, the interest for the year will be $3,000. Because you must repay a total of $33,000 in one year, the finance company requires you to pay $33,000/12, or $2,750, per month over the next 12 months.
(a) This is not really a 10 percent loan. Instead, what is the effective monthly rate?
that will have you paying about 31, 500 total instead of 33,000 if it is a real 10% loan
a 30,000 loan at 10% over 12 months should actually be 2637.47 per month or 31,649.64
18% will get you a payment of 2750.39
my ba-35 lost its battery, so i had to do this the hard way
17.972% will get you payments of exactly 2750.00
big lesson here is—-never believe the finance company, but you already know that
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