a loan is offered with monthly payments and a 9

Finance Aug 17, 2020

a loan is offered with monthly payments and a 9.00 percent APR. Whats's the loan's effective annual rate (EAR)? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Expert Solution

Computation of the effective annual rate (EAR):-

EAR = (1+APR/n)^n-1

Here, n = 12 periods (monthly)

EAR = (1+9%/12)^12-1

= 1.0938 - 1

= 9.38%

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