Question

Joel takes out a loan with a stated rate of 11. 85% interest. If the interest is calculated weekly, how much greater is Joel’s effective rate than his stated rate? a. 0. 72 percentage points b. 0. 52 percentage points c. 0. 70 percentage points d. 0. 67 percentage points.

Answer 1

Answer:

12.57−11.85=0.72%

Explanation:

Answer 2

The effective interest rate is greater by 0.72 percentage points as compared to the nominal interest rates.

Computation:

Given,

$(r)$ Nominal Interest rate =11.85%

$(m)$ compounding period = weekly, that is 52.

The formula of the effective interest rate will be used:

$\begin{aligned}\text{Effective Interest Rate}&=(1+\frac{r}{m})^m-1\\&=(1+\frac{0.1185}{52})^{52}-1\\&=(1.00227)^{52}-1\\&=0.1257\;\text{or}\;12.57\%\end{aligned}$

Now, the difference of the effective interest rate and nominal interest rate will be determined to know the exceeding percentage:

$\begin{aligned}\text{Difference Percentage}&=\text{Effective Interest rate - Nominal Interest rate}\\&=0.1257-0.1185\\&=0.72\end{aligned}$

Therefore, option a. 0.72 percentage points is correct.

To know more about the effective interest rates, refer to the link:

https://brainly.com/question/14270693