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Your are in need of cash and turn to your cousin, who offered to lend you some money. You decide to borrow $1450 and agree to pay back $1660 in two years? Rate of interest charged by cousin ?

Your are in need of cash and turn to your cousin, who offered to lend you some money. You decide to borrow $1450 and agree to pay back $1660 in two years? Rate of interest charged by cousin ?

Essentials Of Investments
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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Your are in need of cash and turn to your cousin, who offered to lend you some money. You decide to borrow $1450 and agree to pay back $1660 in two years?

Rate of interest charged by cousin ?

Expert Solution
Step 1: Show formula

The rate of interest charged by the cousin is calculated using the following equation

I n t e r e s t space r a t e space equals space open parentheses fraction numerator F V over denominator P V end fraction close parentheses to the power of open parentheses 1 divided by n close parentheses end exponent minus 1

Where, FV is the future value of loan amount
PV is the present value of the loan amount

n is number of years

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