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If mega corp. borrows $9,000 and agrees to pay the lender $10,500 in one year, the annual interest rate on this loan is approximately:
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If mega corp. borrows $9,000 and agrees to pay the lender $10,500 in one year, the annual interest rate on this loan is approximately:

User Rjs
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1 Answer

7 votes
In simple interest, the interest rate is
i=(10500-9000)/9000=16.67%

In compound interest, compounded monthly,
10500=9000(1+i/12)^12
=>
APR=12(10500/9000)^(1/12)-1
=11.155%
(effective interest is still 16.67%)
User Matt Schlobohm
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