You have agreed to a $50,000 fixed-rate loan from First National Bank today and promise to repay the loan with 36 equal monthly payments at an APR of 6.50%.What is the EAR of this loan?

Question

Quizplus · Accepted Answer

To find the EAR, we need to first calculate the monthly interest rate using the formula:
i = (APR/12) = (6.50%/12) = 0.5417%
Next, we can use the formula for EAR:
EAR = (1 + i)^12 - 1 = (1 + 0.005417)^12 - 1 = 0.0670 or 6.70%
Therefore, the best choice is B.

You Have Agreed to a $50,000 Fixed-Rate Loan from First