Suppose community bank offers to lend you 20000 for one, Financial Management

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Suppose community bank offers to lend you 20000 for one

Suppose Community Bank offers to lend you $20,000 for one year at a nominal annual rate (annual percentage rate) of 6.00%, but you must make interest payments at the end of each month and then pay off the $20,000 principal amount at the end of the year. What is the effective annual rate (EAR) on this loan?

6.00%

6.09%

6.14%

6.17%

6.19%

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Financial Management: Suppose community bank offers to lend you 20000 for one

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Financial Management: Suppose community bank offers to lend you 20000 for one

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