You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 5 years (60 months), and the normal interest rate would be 12%, with interest paid monthly.
A. What is the monthly loan payment?
B. What is the loan's EFF%?
EFF% is the effective percent interest rate on a loan. This is also called effective annual rate (EAR). Due to the compounding effect of interest, the higher the compounding frequency, the higher the EFF%.
Answer and Explanation:
Since interest is paid monthly, the monthly interest rate is 12% / 12 months = 1% per month.
- PMT = monthly payment
- n = number of months =...
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from Business 110: Business MathChapter 7 / Lesson 6