Question
In: Accounting
Jed wants to borrow $1000 from you. He is proposing to repay you with three annual...
Jed wants to borrow $1000 from you. He is proposing to repay you with three annual payments of $324.59 starting immediately. In addition, he will make a final lump-sum payment of $150 three years from today. What rate of return are you earning on the loan?
Solutions
Expert Solution
Solution:
Net amount of loan given = $1,000 - $324.59
| Computation of rate of return | ||
| Period | Cash Flows | ROR |
| 0 | -$675.41 | 10.06% |
| 1 | $324.59 | |
| 2 | $324.59 | |
| 3 | $150.00 | |
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