Question
In: Finance
Suppose you borrow from a bank $1,997.26 today (t=0). You agree to pay back $3,943.65 in...
Suppose you borrow from a bank $1,997.26 today (t=0). You agree to pay back $3,943.65 in 5 years (t=5). The interest rate (%) that the bank charge you is closest to ________%. Input your answer without the % sign and round your answer to two decimal places.
Solutions
Expert Solution
Interest rate = (CF5/CF0)^(1/n) - 1
Interest rate = (3,943.65/1,997.26)^(1/5) - 1
Interest rate = 1.9745301062^(1/5) - 1
Interest rate = 1.145757614 - 1
Interest rate = 0.145757614
Interest rate = 14.5757614%
Interest rate = 14.58%
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