You have loaned Mr. Brown $1,000 on the condition that he repay you in ten equal annual installments at a 4% annual effective rate of interest. The fifth installment is now due. You and Mr. Brown agree that for $525 in addition to the fifth installment, the loan will be paid off. What is your yield rate? A. Less than 3.4% B. At least 3.4% but less than 3.5% C. At least 3.5% but less than 3.6% D. At least 3.6% but less than 3.7% E. 3.7% or more.
You have loaned Mr. Brown $1,000 on the condition that he repay you in ten equal annual installments at a 4% annual effective rate of interest. The fifth installment is now due. You and Mr. Brown agree that for $525 in addition to the fifth installment, the loan will be paid off. What is your yield rate? A. Less than 3.4% B. At least 3.4% but less than 3.5% C. At least 3.5% but less than 3.6% D. At least 3.6% but less than 3.7% E. 3.7% or more.
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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Question
Transcribed Image Text:You have loaned Mr. Brown $1,000 on the condition that he repay you in ten
equal annual installments
at a 4% annual effective rate of interest. The fifth installment is now due. You
and Mr. Brown
agree that for $525 in addition to the fifth installment, the loan will be paid off.
What is your yield
rate?
A. Less than 3.4%
B. At least 3.4% but less than 3.5%
C. At least 3.5% but less than 3.6%
D. At least 3.6% but less than 3.7%
E. 3.7% or more.
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