What’s the interest rate of a 8-year, annual $3,600 annuity with present value of $20,000? (Use a time value of money calculator or a spreadsheet. Round your answer to 2 decimal places.)
we need to use present value of annuity formula | ||||
= P [1-(1+r)^-n]/r | ||||
Where, | ||||
r= interest rate per period | ||||
P= periodic payment i.e. $36000 | ||||
n= number of period i.e. 8 Years | ||||
$ 20000 = 3600[1-(1+r)^-8]/r | ||||
$20000/3600 = [1-(1+r)^-8]/r | ||||
5.5556* r = 1-(1+r)^-8 | ||||
r= 8.90% | ||||
Therefore inerest rate is 8.90% | ||||
What’s the interest rate of a 8-year, annual $3,600 annuity with present value of $20,000? (Use...
What’s the interest rate of a 8-year, annual $3,600 annuity with present value of $20,000? (Use a time value of money calculator or a spreadsheet. Round your answer to 2 decimal places.)
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