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Pavlova-9 [17]
3 years ago
9

A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $20,000, the interest for the yea

r will be $3,400. Because you must repay a total of $23,400 in one year, the finance company requires you to pay $23,400/12, or $1,950.00, per month over the next 12 months.
1. Is this a 17 percent loan?
2. What rate would legally have to be quoted?
3. What is the effective annual rate?
Business
1 answer:
Sonbull [250]3 years ago
3 0

Answer:

1. Is this a 17 percent loan?

  • No, the loan charges a much higher interest rate

2. What rate would legally have to be quoted?

  • 30%

3. What is the effective annual rate?

  • 34.49%

Explanation:

effective annual rate = (1 + i/n)ⁿ - 1

using a financial calculator, i = 30% (PV = 20,000, PMT = -1,950, Nper = 12, FV = 0)

monthly interest rate = 2.5%

effective annual rate = (1 + 0.30/12)¹² - 1 = (1 + 0.025)¹² - 1 = 1.3449 - 1 = 0.3449 = 34.49%

APR (legal rate) = 2.5% x 12 = 30%

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Answer:

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Explanation:

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Answer:

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After the money launderer conceals the illegal money through bank deposits or purchasing a life insurance policy at the Placement stage, the launderer then proceeds to further break the money into smaller amounts to evade suspicion by numerous transactions and bank deposits at the Layering stage, which is then ended by partial or whole surrenders of life insurance policies to make it now legitimate money.

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