Answered: I would like to understand the process…

I would like to understand the process of this equation and how it end up to be 5%: "If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the interest rate is"

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

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I would like to understand the process of this equation and how it end up to be 5%:

"If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the interest rate is"

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