A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $20,000, the interest for the year will be $3,400. Because you must repay a total of $23,400 in one year, the finance company requires you to pay $23,400/12, or $1,950.00, per month over the next 12 months. 1. Is this a 17 percent loan?
2. What rate would legally have to be quoted?
3. What is the effective annual rate?

1. Is this a 17 percent loan?

2. What rate would legally have to be quoted?

3. What is the effective annual rate?

Explanation:

effective annual rate = (1 + i/n)ⁿ - 1

using a financial calculator, i = 30% (PV = 20,000, PMT = -1,950, Nper = 12, FV = 0)

monthly interest rate = 2.5%

effective annual rate = (1 + 0.30/12)¹² - 1 = (1 + 0.025)¹² - 1 = 1.3449 - 1 = 0.3449 = 34.49%

APR (legal rate) = 2.5% x 12 = 30%

answer: b) the us is the leading importer but not the leading exporter.

extra info:

the u.s is the largest importer but it is not the largest exporter as china sits on the top of the table when it comes to leading exporters.

but u.s is not far from first,

they rank in 2nd globally as the worlds largest exporter.

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