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A local finance company quotes an interest rate of 16
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A local finance company quotes an interest rate of 16.4 percent on one-year loans. So, if you borrow $32,000, the interest for the year will be $5,248. Because you must repay a total of $37,248 in one year, the finance company requires you to pay $37,248/12, or $3,104.00 per month over the next 12 months. |
| 1. Is the interest rate on this loan 16.4 percent? (Yes or no) |
2. What rate would legally have to be quoted? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places
3. What is the effective annual rate? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places
Expert Solution
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