A loan is made for five years at a simple interest rate of 12% per annum....
A loan is made for five years at a simple interest rate of 12% per annum. What is the equivalent annual effective rate of discount during the fourth year of the loan?
Homework Answers
Here i = 0.12 and n = 4
Thus effective rate of discount = i/(1+i(n-1))
= 0.12/(1+0.12*(4-1))
= 0.12/1.36
= 8.82%
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A loan is made for five years at a simple interest rate of 12%
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