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A loan is offered with monthly payments and a 15.25 percent APR. What's the loan's effective...

Question:

A loan is offered with monthly payments and a 15.25 percent APR. What's the loan's effective annual rate (EAR)?

Answer and Explanation:

The effective annual rate (EAR) formula can be applied to find the EAR:

{eq}EAR = (1+\frac{APR}{Months})^{Months}-1\\ EAR = (1+\frac{0.1525}{12})^{12}-1\\ EAR = 16.36\%\\ {/eq}

The EAR is 16.36%.


Learn more about this topic:

Effective Annual Rate: Formula & Calculations

from Business 110: Business Math

Chapter 7 / Lesson 6
14K

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