Question

3. Consider a $2,500 loan, to be repaid in twelve quarterly payments of $243.72 each. Calculate the Annual Percentage Rate of this loan.

Answer 1

We will use excel to calculate the interest rate using IRR function.

Period	Cash flow
0	-2500.00
1	243.72
2	243.72
3	243.72
4	243.72
5	243.72
6	243.72
7	243.72
8	243.72
9	243.72
10	243.72
11	243.72
12	243.72
Quarterly rate	2.50%
Annual rate	10.00%
Formula	=IRR(B2:B14)

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