Problem 6.51 – Calculating Annual and Effective Interest Rates on Loans

Fundamentals of Corporate Finance

Ross, Westerfield, and Jordan

13th Edition

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Difficulty – Medium

What is the legal rate that a finance company should quote if a borrower borrows a certain amount of money with a one-year loan, and is required to repay it in monthly installments? What is the effective annual rate for this loan?

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