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    Nominal and effective annual interest rate

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    Your child's orthodontist offers you two alternative payment plans. The first plan requires a $4,000 immediate up-front payment. The second plan requires you to make monthly payments of $139.68, payable at the end of each month for 3 years. What nominal and effective annual interest rate is built into the monthly payment plan?

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    The intrest rate would be such that the present value of the monthly periods would equal to upfront payment of $4,000. Therefore $4,000 ...

    Solution Summary

    The solution explains how to calculate the nominal and effective annual interest rate