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21-07-2021
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Nate borrowed $38,672 from bank and his friends to expand his casino business. Nate set up an aim to pay $2,450 at the end of each week for 16 weeks. Assume each year has 52 weeks. What are the nominal rate per year and the effective interest rate per year?

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23-07-2021

Answer:

Hence, the Nominal annual rate is 20.28%.

Effective annual rate is 22.43%.

Explanation:

Amount borrowed = $38,672.

Weekly repayment for 16 weeks = $2,500.

Loan repayment = (Loan amount x r) / {1-(1+r)-n}

$2,450 = ($38,672 x r)/{1-(1+r)-16}

r= 0.39%

Weekly interest rate = 0.39%

Nominal annual rate = 0.39 % x 52 weeks = 20.28%

Effective annual rate = [tex](1 + 0.0039^{52} ) - 1[/tex] = 0.2243 = 22.43%

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