You have a car loan with a nominal rate of 8.25 percent. With interest charged monthly,...

Question

Question

You have a car loan with a nominal rate of 8.25 percent. With interest charged monthly, what is the effective annual rate (EAR) on this loan?

business finance

Answer 1

Answer #1

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

=(1+0.0825/12)^12-1

which is equal to

=8.57%(Approx).

Answer 2

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