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Ricky Ripov’s Pawn Shop charges an interest rate of 13.7% per month on loans to its...

Ricky Ripov’s Pawn Shop charges an interest rate of 13.7% per month on loans to its customers. Like all lenders, Ricky must report an annual percentage rate (APR) to consumers. What rate should the shop report? What is the effective annual rate (EAR)? Please help me calculate this problem with a financial calculator

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Answer #1

APR=13.7%/month*12 months

=164.4%

EAR=[(1+APR/m)^m]-1
where m=compounding periods

=(1+0.137)^12-1

=366.79%(Approx).

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