You borrowed $2,000 from a bank and 8 months later, you paid it off with $2,160....

You borrowed $2,000 from a bank and 8 months later, you paid it off with $2,160. What annual interest rate did you pay?

Please show how to set up. Thanks

Expert Solution

PV = Amount borrowed = $2,000

FV = Amount paid = $2,160

Interest amount = Amount paid - Amount borrowed = $2,160 - $2,000 = $160

n = 18 months

Annual interest rate = (Interest amount * 12) / (Amount borrowed * number of months)

= ($160 * 12) / ($2,000 * 8)

= 12%

Therefore, annual interest rate paid is 12%

jeff jeffy answered 2 years ago

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