Answer:
9.92%
Explanation:
First, find the Annual Percentage Rate (APR).
You can do this with a financial calculator using the following inputs;
PV = -24500
N = 60
PMT = 514.55
then CPT I/Y = 0.792% (this is a monthly rate)
APR = 0.792% *12 = 9.5%
Next, convert APR to EAR;
EAR = [tex](1+\frac{APR}{m}) ^{m} -1[/tex]
whereby m= number of compounding periods per year ;12 in this case.
EAR =[tex](1+\frac{0.095}{12}) ^{12} -1[/tex]
= 1.0992476 - 1
=0.0992476 or 9.92%
Therefore, the effective rate on this loan is 9.92%
