Question
a land company has a loan of $8,500 compounded quarterly for 5 years at 6% what is the effective interest rate for the loan?
Answers
Henry
P = Po(1+r)^n
r = (0.06/4) = 0.015 = Quarterly % rate
expressed as a decimal.
n = 4Comp./yr. * 5yrs. = 20 Compounding
periods.
P = 8500(1.015)^20 = 11,448.27
I = = (P-Po)/T = (11448.27-8500)/5 =
589.65 = Int. per yr.
APR = 589.65/8500 = 0.0694 = 6.94%
r = (0.06/4) = 0.015 = Quarterly % rate
expressed as a decimal.
n = 4Comp./yr. * 5yrs. = 20 Compounding
periods.
P = 8500(1.015)^20 = 11,448.27
I = = (P-Po)/T = (11448.27-8500)/5 =
589.65 = Int. per yr.
APR = 589.65/8500 = 0.0694 = 6.94%