CFA Mock Question 76

[BaseballRedhawks]

Hey guys, can someone explain this?
The effective annualized cost (%) of a banker’s acceptance that has an all-inclusive annual rate of 5.25 % for a month loan of $2 mill is closest to.
Having a hard time putting this one together…..
Interest/Net Proceeds *12
I get the one month thing, which is why you multiple by 1/12, but then why 12 at the end again?
Thanks!

 

[inCLYNEd.Honoka]

Because they want it in annualised format?
The division by 12 is because converting annual to monthly. So, since the loan was in one month format, need to annualise it by multiplying by 12.

 

[inCLYNEd.Honoka]

There is just one thing I can’t figure out, but that’s with regards to my HP12C, anyone here using HP12C can tell me if I’m doing anything wrong?
These are my keystrokes:
2,000,000 > ENTER > .0525 > X > 12 > ÷
To get 8,750, continuing on…
2,000,000 > ENTER > 1 > ENTER > .0525 > ENTER > 12 > ÷ > - > X
This will show me 1,991,250. Then I press ÷. Instead of showing 0.004 (I set to 3 dec. place), it shows me 1.004. I kinda figured it should just divide 8,570 by 1,991,250. So, yeah, am I doing something wrong with respect to the keystrokes?