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How would you put this in a financial calculator to get the interest rate



How would you put this in a financial calculator to get the interest rate?

This question illustrates what somewhat unscrupulous lender. You want to borrow $29,000 for one year. The interest rate is 19.5 percent. You lender agree that the interest on the loan will be .195x $29,000 $5,655. So, the lender deducts this interest amount from the loan up front and gives you $23,345. In this case, we say that the discount is known as discount interest. Imagine you are discussing a loan with $5.655. 


What is the interest rate on this loan? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 

Interest rate = _______ %


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Answer #2

AS INTEREST IS DEDUCTED BEGINNING OF THE YEAR ONLY, LOAN AVAILABLE FOR USE = $23,345

SO INTEREST RATE = INTEREST ON LOAN/ LOAN AVAILABLE FOR USE

INTEREST RATE = 5,655/23,345 = 24.22%

ANSWER : 24.22% 


answered by: trang trần
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Answer #1

Using financial calculator
Input:

PV = -23345

FV = 29000

N = 1

Solve for I/Y as 24.22

Hence rate = 24.22%

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