Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. assume you barrow $100,000 for a year and the stat

Assume you barrow $100,000 for a year and the stated interestrate is 5 percent....

Free

70.2K

Verified Solution

Question

Accounting

Assume you barrow $100,000 for a year and the stated interestrate is 5 percent. The loan will be st up as an installment loanwith monthly payment. 1) What is the annual percentage rate? 2)Discuss why the annual percentage rate is different then the statedinterest rate.

Answer & Explanation Solved by verified expert
4.3 Ratings (742 Votes)

Annual percentage rate = [1+i/n]^n   -1         [where n is the number of times interest is compounded in a year]

                =[1+ .05/12]^12    -1

                =[1+ .004167]^12 -1

                = [1.004167]^2    -1

               = 1.0512 - 1

               = .0512 or 5.12%

b)The annual percentage rate is different from stated interest rate due to compounding of interest . The stated interest rate considers the simple interest whereas annual percentage rate considers the compounded interest which is calculated on outstanding amount every time installment is paid .
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

In: AccountingAssume you barrow $100,000 for a year and the stated interestrate is 5 percent. The...Assume you barrow $100,000 for a year and the stated interestrate is 5 percent. The loan will be st up as an installment loanwith monthly payment. 1) What is the annual percentage rate? 2)Discuss why the annual percentage rate is different then the statedinterest rate.

Other questions asked by students

Q

How is the orthopedic rehabilitation process in the shoulder dislocation

Medical Sciences
Q

THESE ARE THE QUESTIONS FROM THE SUBJECT POWER SYSTEM FUNDAMENTALS AND THE TOPIC IS MECHANICAL DESIGN...

Electrical Engineering
Q

Exercise 14-4 Algo Consider the following competing hypotheses: H0: ?xy ? 0 HA: ?xy < 0...

Basic Math
Q

A light inextensible straight thread of length 3 2m is placed on a frictionless horizontal...

Physics
Q

Find the value of y that proves AQRP AQRS Q 70 5y A 55 R...

Geometry
Q

se the quadratic formula to solve the eq 5x 7x 3 0

Calculus
Q

PR 4-5A Complete accounting cycle OBJ. 4,5 For the past several years, Samantha...

Accounting
Q

find the future value compound interest on $6000 at 5% compounded semiannually fir two years....

Accounting
Q

Clipboard 16 3 25 Steve purchased two assets in 2018. A 5 year asset for...

Accounting
Q

Common Stockholders' Profitability Analysis A company reports the following: Net income $195,000 Preferred dividends 7,800...

Accounting
Q

On January 1st, Baker Biscuits Co. had retained earnings of $20,000. During the period, Baker...

Accounting
Q

6. Calculate the annual cash dividends required to be paid for each of the following...

Accounting