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19 October, 05:46

The nominal rate on sarah's loan is 7.250%. if the interest is compounded monthly, what rate of interest is sarah actually paying?

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  1. 19 October, 06:03
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    Montlhy rate = nominal rate / 12 = 7.250% / 12 = 0.07250/12

    Compunded factor: [1 + 0.0725/12]^12 = 1.07496

    Actual rate of interest = [1.07496 - 1] = 0.07496 = 7.496%

    Answer: 7.496%
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