A 10-year loan of 2000 is to be repaid with payments at the end of each year. It can be repaid under the following two options: (i) Equal annual payments at an annual effective rate of ?. (ii) Installments of 200 each year plus interest on the unpaid balance at an annual effective rate of 5%. The sum of the payments under option (i) equals the sum of the payments under option (ii). Determine ?. (?) 4.3% (?) 4.5% (?) 4.7% (?) 4.9% (?) 5.1%
A 10-year loan of 2000 is to be repaid with payments at the end of each year. It can be repaid under the following two options: (i) Equal annual payments at an annual effective rate of ?. (ii) Installments of 200 each year plus interest on the unpaid balance at an annual effective rate of 5%. The sum of the payments under option (i) equals the sum of the payments under option (ii). Determine ?. (?) 4.3% (?) 4.5% (?) 4.7% (?) 4.9% (?) 5.1%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A 10-year loan of 2000 is to be repaid with payments at the end of each year. It can be repaid under the following two options:
(i) Equal annual payments at an annual effective rate of ?.
(ii) Installments of 200 each year plus interest on the unpaid balance at an annual effective rate of 5%.
The sum of the payments under option (i) equals the sum of the payments under option (ii). Determine ?.
(?) 4.3% (?) 4.5% (?) 4.7% (?) 4.9% (?) 5.1%
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