For a $10,000 loan, the lender will receive $2,638 in income from mortgage payments at the...
For a $10,000 loan, the lender will receive $2,638 in income from mortgage payments at the end each of the five years. Calculate the rate of return to the lender on this loan
Homework Answers
5.694%
Solution :
rate of return = (A/P)1/t - 1
Where A = amount at the end of 5 years = 2638×5 = 13190 $
P = 10,000
T = 5
Rate of return = (13190/1000)1/5 -1 = 1.05694 -1 = 0.05694 ×100 = 5.694
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