Problem 9-25 You have a car loan with a nominal rate of 6.10 percent. With inter

Question

Problem 9-25

You have a car loan with a nominal rate of 6.10 percent. With interest charged monthly, what is the effective annual rate (EAR) on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

You have a car loan with a nominal rate of 6.10 percent. With interest charged monthly, what is the effective annual rate (EAR) on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Given data of Nominal interest is 6.10%. and he is paying monthly

Effective annual rate of return =(1+(0.061/12))^12)-1=1.062735-1=0.62735=6.2735%.

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