Beverly Frickerson asks for a $15,000 loan for one year.The bank tells her that it will give her $13,050 and deduct $1,950 in interest upfront.What is the effective rate of interest on this loan?

Question

Quizplus · Accepted Answer

To find the effective rate of interest, we need to use the formula:
Effective Rate of Interest = (Total Interest Paid/Loan Amount) * 100%
Total Interest Paid = $1,950
Loan Amount = $13,050
Effective Rate of Interest = (1,950/13,050) * 100% = 14.94%
Therefore, the answer is A) 14.94 percent.

Beverly Frickerson Asks for a $15,000 Loan for One Year