H hank Junior Member Joined Sep 13, 2006 Messages 209 Jul 8, 2010 #1 I take out a loan for $1200. After one week, the bank expects me to repay $1240. What is the nominal interest rate? I figured it would be 40/1200 * 52, but that is greater than 100%. Help?
I take out a loan for $1200. After one week, the bank expects me to repay $1240. What is the nominal interest rate? I figured it would be 40/1200 * 52, but that is greater than 100%. Help?
D Denis Senior Member Joined Feb 17, 2004 Messages 1,700 Jul 8, 2010 #2 Not "precise" but close; 52 * 40 = 2080 = equivalent interest for 1 year, so: 1200(1 + r) = 3280 r = 1.733333 ; so 173 1/3 % The "actual" true annual rate will be slightly higher, since the $40 is paid after 1 week, not a year later...
Not "precise" but close; 52 * 40 = 2080 = equivalent interest for 1 year, so: 1200(1 + r) = 3280 r = 1.733333 ; so 173 1/3 % The "actual" true annual rate will be slightly higher, since the $40 is paid after 1 week, not a year later...
