Calculating interest using the effective interest rate?
August 22, 2014 7:02 PM Subscribe
I need to calculate the interest to be paid on a loan of $300,000 with a term of 4 years where the effective interest rate is 10%, payable monthly in arrears. How do I do this?
posted by herschellie to Work & Money (12 answers total) 1 user marked this as a favorite
This is for a grad assignment - unfortunately I have no accounting background and the professor was unwilling to explain. I've Googled this to death but to no avail as most pages explain how to calculate effective interest rate and not how to calculate the amount of interest itself. There are two other interest payment options as well: 9% payable annually in advance and 7% where the entire 4 years of interest is paid in advance.
The question doesn't state whether the effective interest rate is annual - this is also confusing me.
I've seen how useful MetaFilter is in other situations so hoping someone out there will be able to help, thank you in advance!