1 if a bank pays 64 interest with continuous compounding, Ask an Expert

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1. If a bank pays 6.4% interest with continuous compounding, what is the effective annual rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

2. Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a 1-year loan is quoted with an interest rate of 16.0% and you borrow $1,000, then you pay back $1,104. But you make these payments in monthly installments of $92 each.

a. What is the true APR on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel.)

b. What is the effective annual rate on the loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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Financial Management, Finance

Category:- Financial Management
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