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:

Financial Meltdown

A sudden and severe downturn in the financial markets that leads to a loss of asset values and can trigger widespread economic crisis.

Equivocality

The existence of multiple and potentially conflicting interpretations or meanings in a situation or communication.

Weick

Karl E. Weick, an American organizational theorist known for his contributions to the understanding of organizational behavior and sensemaking.

Rules

Explicit or understood regulations or principles governing conduct within a particular activity or sphere.