# FM27 6 - d n 1.0 =(1.016432 12 1.0 = 1.2160 1.0 = 0.2160 = 21.60 27-6 a Effective rate = 12 b 0 1 | | i = i = 50,000-50,000

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27-5 \$15,000 installment loan, 11% nominal rate. Effective annual rate, assuming a 365-day year = ? Add-on interest = 0.11(\$15,000) = \$1,650. Monthly Payment = 12 650 , 1 \$ 000 , 15 \$ + = \$1,387.50. 0 1 2 11 12 | | | | | 15,000 -1,387.50 -1,387.50 -1,387.50 -1,387.50 Answers and Solutions: 27 - 6 With a financial calculator, enter N = 12, PV = 15000, PMT = -1387.50, FV = 0, and then press I to obtain 1.6432%. However, this is a monthly rate. Effective annual rate Add-on = (1 + r
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Unformatted text preview: d ) n- 1.0 = (1.016432) 12- 1.0 = 1.2160 - 1.0 = 0.2160 = 21.60%. 27-6 a. Effective rate = 12%. b. 0 1 | | i = ? i = ? 50,000 -50,000 - 4,500 -10,000 (compensating balance) 10,000 40,000-44,500 With a financial calculator, enter N = 1, PV = 40000, PMT = 0, and FV = -44500 to solve for I = 11.25%. Note that, if Hawley actually needs \$50,000 of funds, he will have to borrow 2 . 1 000 , 50 \$ = \$62,500. The effective interest rate will still be 11.25%....
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## This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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