Click here to read the eBook: Finding the Interest Rate, I Click here to read th

ID: 2821873 • Letter: C

Question

Click here to read the eBook: Finding the Interest Rate, I Click here to read the eBook: Comparing Interest Rates EFFECTIVE RATE OF INTEREST Find the interest rates earned on each of the following. Round each answer to two decimal places. a. You borrow $740 and promise to pay back $777 at the end of 1 year b. You lend $740 and the borrower promises to pay you $777 at the end of 1 year. c. You borrow $71,000 and promise to pay back $363,326 at the end of 11 years. d. You borrow $12,000 and promise to make payments of $2,771.70 at the end of each year for 5 years cengage.com/álrn/takeAssignment/takeAssignmentMain.do?takeAssignmentSession here to search ocator- assignment-take, 853d4af9-c236- Ei .zu d

Explanation / Answer

Interest rate = (Future value / Present value)^(1/Years) -1

Interest rate = (777/740)^(1/1) -1 = 5.00%

Interest rate = (363,326/71000)^(1/11) -1 = 16.00%

Rate = 5.00%

Using financial calculator BA II Plus - Input details:

FV = Future Value / Face Value =

$0.00

PV = Present Value of loan =

-$12,000.00

N = Number of years remaining x frequency =

PMT = Payment =

$2,771.70

CPT > I/Y = Rate =

5.00