You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly payments of $90. However, the bank also charges you a loan initiation fee of $28, which is taken out of the initial proceeds of the loan. What is the effective annual interest rate on the loan, taking account of the impact of the initiation fee? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel.)
WHAT IS Effective annual interest rate %???
plz solve this Q
Hi
Here Borrowing amount = $1,000
loan initiation fees = $28
So Borrowing amount after initiation fees PV= 1000 - 28 = $972
time nper = 1 years = 12 months
monthly payment PMT = $90
So using excel function RATE we will find monthly rate
Excel formulas below
Excel Values below
So effective annual rate is 21.83%
Thanks
You borrow $1,000 from the bank and agree to repay the loan over the next year...
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