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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In 1915, Anas allegedly borrowed 7,000$ from a large New York bank on the condition that he would repay 7% of the loan every three months, until a total of 50 payments had been made. At the time of the 50th payment, the 7,000$ loan would be completely repaid. Anas computed his annual interest rate to be (0.07 × 7,000 × 4) ÷ 7,000 = 28%. What true effective annual interest rate did Anas pay? And what went wrong ?
detailed answer without using excel
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