Money that you owe is known as debt

Banks sometimes quote interest rates in the form of "add-on interest." In this case, if a 1-year loan is quoted with a 20% inter

Bess [88]

Answer:

Calculate the true APR:

It is given that the compounding period is 12 as the payment is done monthly. The total loan amount is $1,000 with $100 monthly installments at an interest rate of 20%. Annuity is a stream of cash flows that continues for a given number of years. The interest rate is calculated by following method. Use the following formula to calculate the present value:

$Present value of annuity = c[\frac{1}{r}-\frac{1}{r(1+r)^{t} }]$

Where,

c —) Monthly payment

r —> Interest rate

t —> Compounding period

Now,

$1000 = 100[\frac{1}{r}-\frac{1}{r(1+r)^{12} }]$

We cannot determine the exact value of interest of annuity. Using the trial and error method we can determine the interest rate. We can use the TVM (time value of money) keys in the financial calculator to calculate the value of 'r' as below:

Enter

N = 12

PV = -1000

PMT =100

FV = 0

Now press i and we should find that the monthly rate for this annuity(r) is 2.923% per month.

Effective interest rate is the annualized interest rate using compound interest. Multiply the monthly rate by 12 to obtain APR as below:

APR = Monthly rate x 12

Substitute the values in the formula:

APR = 2.923% x 12

APR = 35.076%

Hence, the APR is 35.076%.

Determine the effective annual rate (EAR):

It is the net annual return received. The monthly rate should be used to calculate the effective annual rate with the help of the formula below:

$1+ effective annual rate = (1 + monthly rate)^{12}$

$1+ effective annual rate = (1 + monthly rate)^{12} -1$

$1+ effective annual rate = (1 + 0.2923)^{12} -1$

Effective annual rate = 0.41302 or 41.302 %

Hence, the effective annual rate is 41.302%.

Finally we may conclude that the true rate would be 20%, if $1,000 was borrowed today and $1,200 was paid back one year from today. It should be noted that the true rate must be greater than 20% because the twelve annual payment of $100 should be made before the end of the year.

8 0

2 years ago

A monetary unit that is freely and easily converted into other currencies is

Brut [27]

Answer:

A hard currency

Explanation:

A monetary unit that is freely and easily converted into other currencies is a hard currency.

The value of this currency neither depreciates suddenly nor fluctuate to a great extend.

This currency is considered politically and economically stable by the nation.

Hard currencies can also be used as a form of payment for goods and services.

4 0

2 years ago

What is the probability that this person was a victim of identity theft that occurred from the unauthorized use of a credit card

liberstina [14]

<span>The probability that this person was a victim of identity theft that occurred from the unauthorized use of a credit card is 0.05%. </span>

5 0

2 years ago

Bramble corp. wants to sell a sufficient quantity of products to earn a profit of $200000. if the unit sales price is $18, unit

mote1985 [20]

To solve for units sold at an income of $200,000:

First, I would subtract the variable cost of $8 from the unit sales price of $18 dollars which gives you $10.

Unit profit = $10

Fixed costs = $200,000

How many units need to be sold to earn an income of $200,000?

40,000 units x $10 = $400,000 - $200,000 = $200,000

40,000 units need to be sold to earn an income of $200,000.

3 0

2 years ago

The umayyad insisted that conquered people pay a special head tax if they did not convert to islam. this head tax was called the

likoan [24]

The special tax was called J<span>izya.</span>

6 0

2 years ago