Answered

Suppose you borrow $5,000 from the bank. the loan terms require you to repay $6,299 three years from now. what is the annual interest rate you would be agreeing to?



Answer :

The Interest Rate Would be 8%

According to The Question,

Calculation is as follows

F = P ( F / P , 10 % ,5) is the formula for determining Rate given a current value of P.

The right response is 8%.

Also,

Calculation of the repayment amount due at the conclusion of the fifth year

  • Future Value = (F/P, 10%, 5000)
  • = 5000 * 1.61051
  • = $8052.5

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