Louie borrowed $2,000 from Phil. Under this agreement, Louie would repay with $1,300 at t = 1 and $1,700 at t = 4 where time is given in years. Louie successfully made the payment in full at t = 1, but he faced some financial difficulty and was only able to pay 60% of what he owed at the time of the second payment. a. What was the annual interest rate (as a percent) for the original loan? b. What is Phil's annual yield (as a percent) for this four-year period?
Louie borrowed $2,000 from Phil. Under this agreement, Louie would repay with $1,300 at t = 1 and $1,700 at t = 4 where time is given in years. Louie successfully made the payment in full at t = 1, but he faced some financial difficulty and was only able to pay 60% of what he owed at the time of the second payment. a. What was the annual interest rate (as a percent) for the original loan? b. What is Phil's annual yield (as a percent) for this four-year period?
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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Louie borrowed $2,000 from Phil. Under this agreement, Louie would repay with $1,300 at t = 1 and $1,700 at t = 4 where time is given in years. Louie successfully made the payment in full at t = 1, but he faced some financial difficulty and was only able to pay 60% of what he owed at the time of the second payment.
a. What was the annual interest rate (as a percent) for the original loan?
b. What is Phil's annual yield (as a percent) for this four-year period?
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