A man approaches a Loan Agency for P100,000 to be paid in 24 monthly instalments. The agency advertises an interest rate of 1.5% per month. They proceed to calculate the amount of his monthly
payment as follows: Amount requested P100,000 Credit investigation P500 Credit risk insurance P1,000 Total P101,500 Interest = P101,500(24)(0.015) = P36,540 Total owed = P36,540 + P101,500 = P138,040 Payment = P138,040 / 24 = P5,751.67 What is the effective rate of interest of the loan?
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