Do Not Use the Approximation Formula for This Problem

question 106

Multiple Choice

Do not use the approximation formula for this problem.Coverall Carpets Inc.is planning to borrow $12,000 from the bank.The bank offers the choice of a 12 percent discounted interest loan or a 10.19 percent add-on, one-year installment loan, payable in 4 equal quarterly payments.What is the effective rate of interest on the 10.19 percent add-on loan?

• A)9.50%
• B)10.19%
• C)15.22%
• D)16.99%
• E)22.05%

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Definitions:

Irrevocable

Something that cannot be changed, reversed, or taken back once it has been established or done.

Grantor

The individual or entity that establishes a trust, transfers property, or conveys rights to another person or entity.

Spendthrift Trust

A trust designed to provide financial support to a beneficiary while protecting the trust assets from the beneficiary's creditors or from being spent recklessly by the beneficiary.

Creditors

Individuals or entities to whom money is owed by a debtor or the company.