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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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EFFECTIVE RATE OF INTEREST Find the interest rates earned on each of the following:

  1. a. You borrow $720 and promise to pay back $792 at the end of 1 year.
  2. b. You lend $720 and the borrower promises to pay you $792 at the end of 1 year.
  3. c. You borrow $65,000 and promise to pay back $98,319 at the end of 14 years.
  4. d. You borrow $15,000 and promise to make payments of $4,058.60 at the end of each year for 5 years.

(a)

Summary Introduction

To calculate: Interest rate earned.

Interest Rate:

Interest rate is an amount of money that is depicted as a percentage of principal. The interest rate is an amount that a lender charges from borrower to lend the money for borrower’s use. The interest rate as well as the term interest varies as per the discussion between the lender and the borrower.

Explanation

The formula for calculating interest rate is,

Interestrate(R)=IPT×100 (I)

Here,

  • R is the interest rate.
  • I is the amount paid in interest for a particular time.
  • P is the principal amount.
  • T is the time period

(b)

Summary Introduction

To calculate: Interest rate earned.

Interest Rate:

Interest rate is an amount of money that is depicted as a percentage of principal. The interest rate is an amount that a lender charges from borrower to lend the money for borrower’s use. The interest rate as well as the term interest varies as per the discussion between the lender and the borrower.

(c)

Summary Introduction

To calculate: Interest rate earned.

Interest Rate:

Interest rate is an amount of money that is depicted as a percentage of principal. The interest rate is an amount that a lender charges from borrower to lend the money for borrower’s use. The interest rate as well as the term interest varies as per the discussion between the lender and the borrower.

(d)

Summary Introduction

To calculate: Interest rate earned.

Interest Rate:

Interest rate is an amount of money that is depicted as a percentage of principal. The interest rate is an amount that a lender charges from borrower to lend the money for borrower’s use. The interest rate as well as the term interest varies as per the discussion between the lender and the borrower.

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