A total of $80,000 is borrowed and repaid with 72 monthly payments, with the first payment...
A total of $80,000 is borrowed and repaid with 72 monthly payments, with the first payment occurring one month after receipt of the $80,000. The stated interest rate is 7.00% compounded quarterly. Part a What is the intereste rate per cash flow period (month)?
Homework Answers
We have to calculate the interest rate per cash flow period.
The interest rate is 7% compounded quarterly.
Suppose the effective interest rate in a month is r
Then, we have (1+r)^3 = 1+0.07/4 since there are 3 months in a quarter and there are 4 quarters in a year.
Thus, r=0.0057996= 0.57996%
The intereste rate per cash flow period (month) is 0.57996%
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