Suppose that you borrow $10,000 today from Falcon Savings & Loan (S&L) and promise to pay...

Suppose that you borrow $10,000 today from Falcon Savings & Loan (S&L) and promise to pay this loan back in 6 years with a total payment (principal plus interest) of $14,500. What is the effective annual interest rate that the S&L is charging? Assume monthly compounding. Do not round at intermediate steps in your calculation. Express your answer in percent. Round to two decimal places. Do not type the % symbol.

Solutions

Expert Solution

Calculation of annual percentage rate using the RATE function:

=RATE(nper,pmt,pv,fv)

=RATE(6*12,0,-10000,14500)*12

=6.21%

Where,

nper is no of periods,

pv is present value,

fv is future value

calculation of effective interest rate:-

=(1+r/n)^n-1

=(1+6.21%/12)^12-1

=6.39%

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Suppose that you borrow $10,000 today from Falcon Savings & Loan (S&L) and promise to pay...

Suppose that you borrow $10,000 today from Falcon Savings & Loan (S&L) and promise to pay this loan back in 6 years with a total payment (principal plus interest) of $15,713. What is the effective annual interest rate that the S&L is charging? Assume monthly compounding. Do not round at intermediate steps in your calculation. Express your answer in percent. Round to two decimal places. Do not type the % symbol.

You borrow $7,000 today and promise to repay the loan over the next three years with 36 equal, end-of-month payments starting one month from today.

You borrow $7,000 today and promise to repay the loan over the next three years with 36 equal, end-of-month payments starting one month from today. The interest rate is 4% APR compounded monthly. What is the amount of each payment? Round only your final answer to two decimal places.• $206.67• $194.44• $214.98• $202.19• $223.86

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.

You plan to borrow $10,000 from the bank to pay for inventories for a gift shop...

You plan to borrow $10,000 from the bank to pay for inventories for a gift shop you have just opened. The bank offers to lend you the money at 8 percent annual interest for the 3 months the funds will be needed (assume a 360-day year). a. Calculate the annualized rate of interest on the loan. b. In addition, the bank requires you to maintain a 14 percent compensating balance in the bank. Because you are just opening your business,...

1) Suppose you deposited $10,000 into a savings account today. The account pays a nominal annual...

1) Suppose you deposited $10,000 into a savings account today. The account pays a nominal annual interest rate of 12%, but interest is compounded quarterly. Assuming that you make no additional deposits into or withdrawals from the account, what will your ending balance be 10 years from today? 2) A firm expects to pay dividends at the end of each of the next four years of $2.00, $2.50, $2.50, and $3.50. If growth is then expected to be constant at 8...

Suppose you borrow from a bank $2,014.61 today (t=0). You agree to pay back $4,518.71 in 7 years (t=7)

Suppose you borrow from a bank $2,014.61 today (t=0). You agree to pay back $4,518.71 in 7 years (t=7). The interest rate (%) that the bank charge you is closest to ________%

Your brother wants to borrow 10,000 from you. He has offered to pay you back $13,250...

Your brother wants to borrow 10,000 from you. He has offered to pay you back $13,250 in a year. If the cost of capital of this investment opportunity is 9% what is its NPV? Should you undertake the investment opportunity? calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. If the cost of capital of this investment opportunity is 12 % ------ What is its NPV?...

Suppose you have deposited $10,000 in your high-yield saving account today. The savings account pays an...

Suppose you have deposited $10,000 in your high-yield saving account today. The savings account pays an annual interest rate of 4%, compounded semi-annually. Three years from today you will withdraw R dollars. You will continue to make additional withdraws of R dollars every 6 months, until you have a zero balance after your last withdrawal 6 years from now. Find R.

LOAN AMORTIZATION. Today is T=0. You borrow $250,000 today at a rate of interest of 8%....

LOAN AMORTIZATION. Today is T=0. You borrow $250,000 today at a rate of interest of 8%. You agree to repay the loan over five years. Assuming a 40% tax rate, what are the tax implications, annually, if you repay the loan as a Zero amortization schedule Full amortization schedule Partial amortization schedule ($100,000 extra balloon payment at T=5

Calculate interest rate. ou borrow $67,000 and promise to pay back $148,116 at the end of...

Calculate interest rate. ou borrow $67,000 and promise to pay back $148,116 at the end of 7 years. 11 % You borrow $15,000 and promise to make payments of $4,058.60 at the end of each year for 5 years. 20 %

Subjects