Lewis and Clark Camping Supplies Inc. is borrowing $54,000 from Western State Bank. The total interest...
Lewis and Clark Camping Supplies Inc. is borrowing $54,000 from Western State Bank. The total interest is $20,800. The loan will be paid by making equal monthly payments for the next three years. What is the effective rate of interest on this installment loan?
Homework Answers
Loan amount(PV) = $ 54000
Interest paid = $ 20,800
Number of years(nper) = 3 = 36 months
Total amount repaid = 54,000 + 20,800 = $ 74,800
Monthly payments on the loan (PMT) = 74,800/36 = $ 2077.77
Rate of interest = 
= 1.88% per month =
22.55% per annum
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