Question

# Guzman just borrowed \$79,000 to buy a filtrstion system. The terms of the loan require him...

Guzman just borrowed \$79,000 to buy a filtrstion system. The terms of the loan require him to make equal regular quarterly payments for 8 years plus an extra payment of \$ 5,500 in 8 years. His first regular quarterly payment is due in 3 months. If guzmans regular quarterly payment is &3,656.12 , then what is the EAR of his loan.

a 11.16% ( plus or minus .03 percentage points)
b 13.01% ( plus or minus .03 percentage point
c 11.64 % ( plus or minus .03 percentage point
d 10.72 % ( plus or minus .03 percentage point
e none

 = C*[1-(1+i)^-n]/i] +final amount/(1+r)^32 Where, C= Cash Flow per period i = interest rate per period n=number of period c=8*4 =32 79000= \$3656.12[ 1-(1+r)^-32 /r] +5500/(1+r)^32 79000/3656.12 =[ 1-(1+r)^-32 /r] +5500/(1+r)^32 2.16076 =[ 1-(1+r)^-32 /r] +5500/(1+r)^32 r = 2.79% Effective Annual Rate = (1+0.0279)^ 4 -1 =11.64% Correct Answer =c 11.64 % ( plus or minus .03 percentage point

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