Finance Basics

Suppose Community Bank offer to lend you $10,000 for one year at a nominal annual rate of 8%, but you must make interest payments at the end of each quarter and then pay off the $10,000 principle amount at the end of the year. What is the effective annual rate on the loan? Explain.

a) 24%
b) 45%
c) 66%
d) 88%
c) 10%

 


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