Answer:
9.38%
Step-by-step explanation:
PV = $9,875
PMT = $863.58
NPER = 12
Using the MS Rate Function to derive the Periodic rate
Periodic rate = Rate(NPER, -PMT, PV)
Periodic rate = Rate(12, -863.58, 9,875)
Periodic rate = 0.0075
Periodic rate = 0.75%
Nominal rate = Periodic rate * NPER
Nominal rate = 0.75% * 12
Nominal rate = 9%
Using the MS Effect Function to derive the effective annual rate (EAR)
Nominal rate = 9%
NPER = 12
Effective annual rate (EAR) = Effect(Nominal rate, NPER)
Effective annual rate (EAR) = Effect(9%, 12)
Effective annual rate (EAR) = 0.0938
Effective annual rate (EAR) = 9.38%
So, the the effective annual rate (EAR) you are paying is 9.38%.