EFFECTIVE RATE OF INTEREST Find the interest rates earned on each of the followi
ID: 2809546 • Letter: E
Question
EFFECTIVE RATE OF INTEREST Find the interest rates earned on each of the following. Round each answer to two decimal places.
a.)You borrow $750 and promise to pay back $795 at the end of 1 year.
%
b.)You lend $750 and the borrower promises to pay you $795 at the end of 1 year.
%
c.)You borrow $92,000 and promise to pay back $180,978 at the end of 10 years.
%
d.)You borrow $8,000 and promise to make payments of $2,219.30 at the end of each year for 5 years.
%
*Please show how to solve on TI: BA II PLUS calculator.
Explanation / Answer
Using financial calculator BA II Plus - Input details:
a.
b.
c.
d.
FV = Future Value / Face Value =
-$795.00
-$795.00
-$180,978.00
$0.00
PV = Present Value =
$700.00
$700.00
$92,000.00
$8,000.00
N = Number of years remaining x frequency =
1
1
10
5
PMT = Payment = Coupon / frequency =
$0.00
$0.00
$0.00
-$2,219.30
CPT > I/Y = Rate =
13.571429
13.571429
7.000004
12.000403
Rate in percentage = Rate / 100 = Interest rate =
13.57%
13.57%
7.00%
12.00%
Using financial calculator BA II Plus - Input details:
a.
b.
c.
d.
FV = Future Value / Face Value =
-$795.00
-$795.00
-$180,978.00
$0.00
PV = Present Value =
$700.00
$700.00
$92,000.00
$8,000.00
N = Number of years remaining x frequency =
1
1
10
5
PMT = Payment = Coupon / frequency =
$0.00
$0.00
$0.00
-$2,219.30
CPT > I/Y = Rate =
13.571429
13.571429
7.000004
12.000403
Rate in percentage = Rate / 100 = Interest rate =
13.57%
13.57%
7.00%
12.00%
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