A college student, needs to borrow $5,000 today for his tuition bill. He agrees to pay back the loan in a lump-sum payment 5 years from now, after he is out of college. The bank states that the payment will need to be $7,012.76. If John borrows the $5,000 from the bank, what nominal interest rate is he paying on his loan?
A college student, needs to borrow $5,000 today for his tuition bill. He agrees to pay back the loan in a lump-sum payment 5 years from now, after he is out of college. The bank states that the payment will need to be $7,012.76. If John borrows the $5,000 from the bank, what nominal interest rate is he paying on his loan?
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 28P
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Question
![A college student, needs to borrow $5,000 today for his tuition bill. He agrees to pay back the loan in a lump-sum payment 5 years from now,
after he is out of college. The bank states that the payment will need to be $7,012.76. If John borrows the $5,000 from the bank, what nominal
interest rate is he paying on his loan?
O 7.5%
O 7%
O 7.25%
O 8%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5998a153-ae56-4fc8-9e77-da4c78b3bd6d%2F5c134e83-533c-4404-954d-343089005445%2Fbt1nbgs_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A college student, needs to borrow $5,000 today for his tuition bill. He agrees to pay back the loan in a lump-sum payment 5 years from now,
after he is out of college. The bank states that the payment will need to be $7,012.76. If John borrows the $5,000 from the bank, what nominal
interest rate is he paying on his loan?
O 7.5%
O 7%
O 7.25%
O 8%
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