You paid $600 interest on a 9-month $15,000 margin loan. What was the effective interest rate on the loan?

Question

Quizplus · Accepted Answer

To find the effective interest rate on the loan, we need to use the following formula:

Effective interest rate = (total interest paid / principal) x (12 / n)

where n is the number of months in the loan term.

Plugging in the given values, we get:

Effective interest rate = (600 / 15,000) x (12 / 9)
Effective interest rate = 0.04 x 1.33
Effective interest rate = 0.0532 or 5.32%

Therefore, the effective interest rate on the loan was 5.32%, which is closest to option B, 5.91%.

You Paid $600 Interest on a 9-Month $15,000 Margin Loan