Chapter 5, Problem 12P

### Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

Chapter
Section

### Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

# EFFECTIVE RATE OF INTEREST Find the interest rates earned on each of the following: a. You borrow $700 and promise to pay back$749 at the end of 1 year. b. You lend $700 and the borrower promises to pay you$749 at the end of 1 year. c. You borrow $85,000 and promise to pay back$201,229 at the end of 10 years. d. You borrow $9,000 and promise to make payments of$2,684.80 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, which a lender charge from the borrower to lends its money for borrowers use. The interest rate as well as interest term varies as per the discussion between the lender and the borrower. The best example of interest rate is the amount, which we receive from bank on depositing our money.

Explanation

Solution:

The formula for calculating interest rate is,

Interestrate(R)=IPT×100 (I)

Here,

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

(b)

Summary Introduction

To determine: The interest rate.

(c)

Summary Introduction

To determine: The interest rate.

(d)

Summary Introduction

To determine: The interest rate.

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