Answer:
9.90%
Explanation:
The appropriate approach is to include the amount expected to kept in non-interest bearing account as part of the loan
total loan=$400,000/0.95= 421,052.63
Interest charge = 421,052.63*9%*6/12=$18,947.37
interest rate percentage=$18,947.37/$400,000=4.74%
Effective annual rate=(1+4.74% /6)^12-1 =9.90%
By dividing by 6, the interest is expressed in monthly terms
By raising to the power of 12 , it is expressed in yearly terms
