Do Not Use the APR Formula for This Problem

question 43

Multiple Choice

Do not use the APR 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%

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Definitions:

Syndicate

A group of underwriters formed to reduce the risk and help to sell an issue.

Group of Underwriters

A team of financial institutions or individuals that jointly take on the risk of issuing new securities by purchasing them from the issuer and selling them to the public.

Reduce Risk

Strategies and measures employed by individuals or companies to minimize the exposure to financial loss or operational failures.

Underwriters

Organizations or individuals that assess and accept the risk of another party in exchange for a fee, typically in the context of insurance or investment banking.