Question

When calculating a loan’s effective interest rate, if the nominal rate is 8.5%, what value of i do you plug into your equation? a. 8.5 b. 0.85 c. 0.085 d. 1.85

Answer 1

The value of interest rate should be 0.085.

We have given that the interest rate is 8.5% So we have given in percentage form but we use always decimal form of interest.

What is the decimal form of percentage?

To convert a percentage to a decimal, divide by 100.

So the decimal form of the 8.5% is calculated by

$\frac{8.5}{100}=0.085$

Therefore the option c is correct.

Therefore we use the interest rate is 0.085.

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