Loan of $100,000 at 10% p.a add-on. Loan payable 6 monthly installments. What is the effective interest rate?
Answers:
same as what it was in the beginning, 10% p.a, add on. the amont paid however is another matter and you need to amortize the loan to determine amount of interest paid. it should be almost 5000, more or less, depending on how the interest is figured, simple, or compounded. if compounded, over what time frame, daily, weekly, monthly. compounding causes the amount of interest paid to rise, as the time for compounding shortens, ie, gets shorter as in daily, not weekly. daily is the most expensive, simple the cheapest.
you will need to know all the information about the loan and interest to amortize a loan accurately.
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