Question

EFFECTIVE RATE OF INTEREST Find the interest rates earned on each of the following. Round each...

EFFECTIVE RATE OF INTEREST

Find the interest rates earned on each of the following. Round each answer to two decimal places.

You borrow $750 and promise to pay back $780 at the end of 1 year.

%

You lend $750 and the borrower promises to pay you $780 at the end of 1 year.

%

You borrow $60,000 and promise to pay back $116,924 at the end of 7 years.

%

You borrow $8,000 and promise to make payments of $2,219.30 at the end of each year for 5 years.

%

Homework Answers

Answer #1

HI

for the first question here

Present value = $750

Future value = 780

time n = 1

r=?

future value =present value *(1+r)^n

780 = 750*(1+r)^1

r=4% so you have paid on interest rate of 4%

same way second question

you have got interest rate of 4%

third question

116924=60000*(1+r)^7

r= 10% hence you will pay at interst rate of 10%

forth question

here PV =8000

payment PMT= -2219.3

time nper = 5

so we will use excel formula to find out the rate here

RATE(nper,PMT,PV) = RATE(5,-2219.3,8000) =12%

hence you will pay at the rate of 12%

Thanks

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