Picabo borrows $1000. To repay the amount, she makes 12 equal monthly payments of $93.12. Determine the following: a)The effective monthly interest rate. b)The nominal annual interest rate. c)The effective annual interest rate.

Effective monthly interest rate = 0.982%

Nominal annual interest rate = 11.74 %

Effective annual interest rate = 11.78%

Explanation:

A = P*(1 + r/100)ⁿ

Where n is time period in years, and r is the yearly interest rate

12*93.12 = 1000*(1 + 0.01r)¹

1117.44/1000 = 1 + 0.01r

1.1174 = 1 + 0.01r

0.01r = 1.1174 - 1

r = 0.1174/0.01 = 11.74 %

Nominal annual interest rate = 11.74 %

Monthy interest rate = annual interest rate/months in a year

Monthy interest rate = 11.74/12

Nominal monthy interest rate = 0.978%

Effective monthly interest rate = (1 + monthly interest rate/12)¹² - 1

Effective monthly interest rate = (1 + 0.00978/12)¹² - 1

Effective monthly interest rate = (1 + 0.00978/12)¹² - 1

Effective monthly interest rate = (1.000815)¹² - 1

Effective monthly interest rate = 1.00982 - 1

Effective monthly interest rate = 0.982%

Effective annual interest rate = Effective monthly interest*months in a year

Effective annual interest rate = 0.982*12

Effective annual interest rate = 0.982*12

Effective annual interest rate = 11.78%

fractionally backed paper money

fiat money

paper money

metallic money

since the options are not listed, when you are working on your budget you should also add water, tv, internet, miscellaneous and your 'fun' money for in your budget. when budgeting, you need to allow for fun money, and mis/accidental money so that you stick to the budget and not go crazy because you feel strapped to the budget.