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%