In: Finance
Suppose that you borrow $10,000 today from Falcon Savings & Loan (S&L) and promise to pay this loan back in 6 years with a total payment (principal plus interest) of $15,713. What is the effective annual interest rate that the S&L is charging? Assume monthly compounding. Do not round at intermediate steps in your calculation. Express your answer in percent. Round to two decimal places. Do not type the % symbol.
Calculation of Annual percentage rate:
=RATE(nper,pmt,pv,fv)
=RATE(6*12,,-10000,15713)*12
=7.56%
Where,
nper is number of periods,
pv is present value,
fv is future value
Effective annual rate:
=(1+APR/n)^n-1
=(1+7.56%/12)^12-1
=7.82%
The answer is 7.82%