A loan of $3,000 for a new, high-end laptop computer is to be repaid in 15 end-of-month payments (starting one month from now)

Economics Nov 04, 2020

A loan of $3,000 for a new, high-end laptop computer is to be repaid in 15 end-of-month payments (starting one month from now). The monthly payments are determined as follows. Loan principal $3,000 Interest for 15 months at 1.5% per month 675 Loan application fee 150 Total $3,825 Monthly payment = $3,825/15 = $255 What nominal and effective interest rates per year are actually being paid? Hint: Draw a cash-flow diagram from the perspective of the lender.

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