If you borrow $12,000 and are required to pay back the loan in five equal annual...
If you borrow $12,000 and are required to pay back the loan in five equal annual installments of 3,000, what is the interest rate associated with the loan?
Homework Answers
Let interest rate be x%
At this rate;present value of annual payments=12000
12000=3000/1.0x+3000/1.0x^2+3000/1.0x^3+3000/1.0x^4+3000/1.0x^5
Hence x=interest rate=7.93%(Approx).
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