Monthly interest rate = 8.40% / 12 = 0.7% Effective anuual rate = (1 + 0.007)12 -1 Effective anuual rate = 0.0873 or 8.73% Solution Monthly interest rate = 8.40% / 12 = 0.7% Effective anuual rate = (1 + 0.007)12 -1 Effective anuual rate = 0.0873 or 8.73%.