Company ABC is offered a 1-year loan of $50,000 from Bank DEF. The nominal interest rate is 12%p.a. and interest is to be paid at the beginning of the loan. Question 17 options: 1) The effective interest rate of the loan will be 12.00%p.a. 2) The effective interest rate of the loan will be 10.71%p.a. 3) The effective interest rate of the loan will be 13.64%p.a. 4) There is insufficient information to determine the effective interest rate.

The effective rate of interest would be calculated as the company considering for compounding of the…

Answered: Company ABC is offered a 1-year loan of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 17P

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Company ABC is offered a 1-year loan of $50,000 from Bank DEF. The nominal interest rate is 12%p.a. and interest is to be paid at the beginning of the loan.

Question 17 options:

1)	The effective interest rate of the loan will be 12.00%p.a.

2)	The effective interest rate of the loan will be 10.71%p.a.

3)	The effective interest rate of the loan will be 13.64%p.a.

4)	There is insufficient information to determine the effective interest rate.

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