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Approximate Nominal Rate of Interest

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Coverall Carpets Inc. is planning to borrow $12,000 from the bank. The bank offers the choice of a 12 percent discount interest loan or a 10.19 percent add-on, one-year installment loan, payable in 4 equal quarterly payments. What is the approximate (nominal) rate of interest on the 10.19 percent add-on loan?

a. 5.10%
b. 10.19%
c. 12.00%
d. 20.38%
e. 30.57%

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Solution Summary

The solution depicts the steps to calculate the approximate rate of interest in the given case.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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