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11 November, 06:15

If mega corp. borrows $9,000 and agrees to pay the lender $10,500 in one year, the annual interest rate on this loan is approximately:

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  1. 11 November, 06:30
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    In simple interest, the interest rate is

    i = (10500-9000) / 9000=16.67%

    In compound interest, compounded monthly,

    10500=9000 (1+i/12) ^12

    =>

    APR=12 (10500/9000) ^ (1/12) - 1

    =11.155%

    (effective interest is still 16.67%)
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