Answer:
APR = 21.9%.
Step-by-step explanation:
We can assume that Bob businessman offers the 20%, but interest is compounded monthly.
First we must determine the monthly interest rate = 20% / 12 months = 1.667%
to determine the total APR we must calculate compound interest for the year:
compound interest = (1 + r)ⁿ = (1 + 1.667%)¹² = 21.9%
*compound interest refers to interest that gains interest.
