Question

1.If you save $100 per month, what annual rate of interest must you earn in order to accumulate $10,000 after ____ years?

2. If you borrow $250,000 for ______ years and your monthly payment is $1000, what rate of interest are you paying?

Answer #1

1.If you save $100 per month, what annual rate of interest must you earn in order to accumulate $10,000 after 7 years?

Using financial calculator

N=12*7

PMT=-100

PV=0

FV=10000

CPT I/Y=0.4092%

Hence, annual rate of interest=0.4092%*12=4.9100%

2. If you borrow $250,000 for 30 years and your monthly payment is $1000, what rate of interest are you paying?

Using financial calculator

N=12*30

PMT=-1000

PV=250000

FV=0

CPT I/Y=0.2161%

Hence, annual rate of interest=0.2161%*12=2.5935%

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