The annual percentage rate and the effective annual rate of the two loans Introduction: The annual rate that is earned from an investment or charged for a borrowing is an annual percentage rate and it is also represented as APR. Thus, the APR is calculated by multiplying the interest rate per period with the number of months in a year. The effective annual rate is the rate of interest that is expressed as if it were compounded once in a year.

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Chapter 6, Problem 66QP

Summary Introduction

To calculate: The annual percentage rate and the effective annual rate of the two loans

Introduction:

The annual rate that is earned from an investment or charged for a borrowing is an annual percentage rate and it is also represented as APR. Thus, the APR is calculated by multiplying the interest rate per period with the number of months in a year. The effective annual rate is the rate of interest that is expressed as if it were compounded once in a year.

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