Answer:
She is actually paying a rate of 7.36% of interest.
Step-by-step explanation:
The real interest rate, as a decimal, is given by:
[tex]I = (1 + \frac{r}{n})^{n}[/tex]
In which r is the interest rate and n is the number of compoundings during an year.
The nominal rate on Sandra's loan is 7.125%, compounded monthly:
This means that [tex]r = 0.07125, n = 12[/tex]
So
[tex]I = (1 + \frac{0.07125}{12})^{12} = 1.0736[/tex]
As a percentage: 1.0736*100 = 107.36% - 100% = 7.36%
She is actually paying a rate of 7.36% of interest.
