Question

Homework: Chapter 5 Homework 13 of 21 (8 complete) HW Score: 33.14.695 of 21 Score: 0 of 1 pt Problem 5-28 (similar to) end of your payments of $7.000 with the first payment to be received your hom now White (Solving for rof an annut You lend a friend $30,000, which your friend wil repay in 6 equat an return does your loan receive The rate of return your loan will receive is (Round to two decimal places)

Answer 1

let the rate of return be x

Present value = annual payments*Present value annuity factor

30,000 = 7,000*PVAF(x%, 6 years)

PVAF(x%, 6 years) = 4.2857

Using table,

PVAF(10%, 6 years) = 4.3553

PVAF(11%, 6 years) = 4.2305

Using interpolation

x = 10% + (4.3553 - 4.2857)/(4.3553 - 4.2305)

= 10.5577%

i.e. 10.56%