The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

Question

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Answer 1

Question

Chapter 3, Problem 20P

(a)

To determine

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

(a)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years is 14.01%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 2

2600 2000 = (1+r) 2

1.3 = (1+r) 2

The next step is to calculate the second square root of 1.3 in order to determine the value of ‘r’.

1.32 =1+r1.140175 = 1+rr = 1.140175−1r = 0.1401r = 14.01%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(b)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years.

(b)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years is 9.13%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 3

2600 2000 = (1+r) 3

1.3 = (1+r) 3

Next, the third square root of 1.3 is being calculated to determine the ‘r’ value.

1.33 = 1+r1.0913 = 1+rr = 1.0913−1r = 0.0913r = 9.13%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(c)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years.

(c)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years is 4.46%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 6

2600 2000 = (1+r) 6

1.3 = (1+r) 6

The sixth square root of 1.3 is being calculated next, to determine the value of ‘r’.

1.3 6 = 1+r1.04469 = 1+rr = 1.04469−1r = 0.04469r = 4.46%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(d)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years.

(d)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years would be 2.65%.

Explanation of Solution

FV = PV(1+r) n

2600 = 2000 (1+r) 10

2600 2000 = (1+r) 10

1.3 = (1+r) 10

The tenth square root of 1.3 is being calculated next, in determining the value of ‘r’.

1.310 = 1+r1.02658 = 1+rr = 1.02658−1r = 0.02658r = 2.65%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

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Answer 2

Question

Chapter 3, Problem 20P

(a)

To determine

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

(a)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years is 14.01%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 2

2600 2000 = (1+r) 2

1.3 = (1+r) 2

The next step is to calculate the second square root of 1.3 in order to determine the value of ‘r’.

1.32 =1+r1.140175 = 1+rr = 1.140175−1r = 0.1401r = 14.01%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(b)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years.

(b)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years is 9.13%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 3

2600 2000 = (1+r) 3

1.3 = (1+r) 3

Next, the third square root of 1.3 is being calculated to determine the ‘r’ value.

1.33 = 1+r1.0913 = 1+rr = 1.0913−1r = 0.0913r = 9.13%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(c)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years.

(c)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years is 4.46%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 6

2600 2000 = (1+r) 6

1.3 = (1+r) 6

The sixth square root of 1.3 is being calculated next, to determine the value of ‘r’.

1.3 6 = 1+r1.04469 = 1+rr = 1.04469−1r = 0.04469r = 4.46%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(d)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years.

(d)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years would be 2.65%.

Explanation of Solution

FV = PV(1+r) n

2600 = 2000 (1+r) 10

2600 2000 = (1+r) 10

1.3 = (1+r) 10

The tenth square root of 1.3 is being calculated next, in determining the value of ‘r’.

1.310 = 1+r1.02658 = 1+rr = 1.02658−1r = 0.02658r = 2.65%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 3, Problem 20P

(a)

To determine

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

(a)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years is 14.01%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 2

2600 2000 = (1+r) 2

1.3 = (1+r) 2

The next step is to calculate the second square root of 1.3 in order to determine the value of ‘r’.

1.32 =1+r1.140175 = 1+rr = 1.140175−1r = 0.1401r = 14.01%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(b)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years.

(b)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years is 9.13%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 3

2600 2000 = (1+r) 3

1.3 = (1+r) 3

Next, the third square root of 1.3 is being calculated to determine the ‘r’ value.

1.33 = 1+r1.0913 = 1+rr = 1.0913−1r = 0.0913r = 9.13%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(c)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years.

(c)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years is 4.46%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 6

2600 2000 = (1+r) 6

1.3 = (1+r) 6

The sixth square root of 1.3 is being calculated next, to determine the value of ‘r’.

1.3 6 = 1+r1.04469 = 1+rr = 1.04469−1r = 0.04469r = 4.46%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(d)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years.

(d)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years would be 2.65%.

Explanation of Solution

FV = PV(1+r) n

2600 = 2000 (1+r) 10

2600 2000 = (1+r) 10

1.3 = (1+r) 10

The tenth square root of 1.3 is being calculated next, in determining the value of ‘r’.

1.310 = 1+r1.02658 = 1+rr = 1.02658−1r = 0.02658r = 2.65%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 3, Problem 20P

(a)

To determine

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

(a)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years is 14.01%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 2

2600 2000 = (1+r) 2

1.3 = (1+r) 2

The next step is to calculate the second square root of 1.3 in order to determine the value of ‘r’.

1.32 =1+r1.140175 = 1+rr = 1.140175−1r = 0.1401r = 14.01%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(b)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years.

(b)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years is 9.13%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 3

2600 2000 = (1+r) 3

1.3 = (1+r) 3

Next, the third square root of 1.3 is being calculated to determine the ‘r’ value.

1.33 = 1+r1.0913 = 1+rr = 1.0913−1r = 0.0913r = 9.13%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(c)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years.

(c)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years is 4.46%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 6

2600 2000 = (1+r) 6

1.3 = (1+r) 6

The sixth square root of 1.3 is being calculated next, to determine the value of ‘r’.

1.3 6 = 1+r1.04469 = 1+rr = 1.04469−1r = 0.04469r = 4.46%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(d)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years.

(d)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years would be 2.65%.

Explanation of Solution

FV = PV(1+r) n

2600 = 2000 (1+r) 10

2600 2000 = (1+r) 10

1.3 = (1+r) 10

The tenth square root of 1.3 is being calculated next, in determining the value of ‘r’.

1.310 = 1+r1.02658 = 1+rr = 1.02658−1r = 0.02658r = 2.65%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 3, Problem 20P

(a)

To determine

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

(a)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years is 14.01%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 2

2600 2000 = (1+r) 2

1.3 = (1+r) 2

The next step is to calculate the second square root of 1.3 in order to determine the value of ‘r’.

1.32 =1+r1.140175 = 1+rr = 1.140175−1r = 0.1401r = 14.01%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(b)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years.

(b)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years is 9.13%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 3

2600 2000 = (1+r) 3

1.3 = (1+r) 3

Next, the third square root of 1.3 is being calculated to determine the ‘r’ value.

1.33 = 1+r1.0913 = 1+rr = 1.0913−1r = 0.0913r = 9.13%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(c)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years.

(c)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years is 4.46%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 6

2600 2000 = (1+r) 6

1.3 = (1+r) 6

The sixth square root of 1.3 is being calculated next, to determine the value of ‘r’.

1.3 6 = 1+r1.04469 = 1+rr = 1.04469−1r = 0.04469r = 4.46%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

(d)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years.

(d)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years would be 2.65%.

Explanation of Solution

FV = PV(1+r) n

2600 = 2000 (1+r) 10

2600 2000 = (1+r) 10

1.3 = (1+r) 10

The tenth square root of 1.3 is being calculated next, in determining the value of ‘r’.

1.310 = 1+r1.02658 = 1+rr = 1.02658−1r = 0.02658r = 2.65%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

Answer 6

Chapter 3, Problem 20P

(a)

To determine

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

(a)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years is 14.01%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 2

2600 2000 = (1+r) 2

1.3 = (1+r) 2

The next step is to calculate the second square root of 1.3 in order to determine the value of ‘r’.

1.32 =1+r1.140175 = 1+rr = 1.140175−1r = 0.1401r = 14.01%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

Answer 7

Chapter 3, Problem 20P

(a)

To determine

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

Answer 8

(a)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years is 14.01%.

Answer 9

(a)

Expert Solution

Answer 10

(a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 2

2600 2000 = (1+r) 2

1.3 = (1+r) 2

The next step is to calculate the second square root of 1.3 in order to determine the value of ‘r’.

1.32 =1+r1.140175 = 1+rr = 1.140175−1r = 0.1401r = 14.01%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Answer 13

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

Answer 14

(b)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years.

(b)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years is 9.13%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 3

2600 2000 = (1+r) 3

1.3 = (1+r) 3

Next, the third square root of 1.3 is being calculated to determine the ‘r’ value.

1.33 = 1+r1.0913 = 1+rr = 1.0913−1r = 0.0913r = 9.13%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

Answer 15

(b)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years.

Answer 16

(b)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years is 9.13%.

Answer 17

(b)

Expert Solution

Answer 18

(b)

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 3

2600 2000 = (1+r) 3

1.3 = (1+r) 3

Next, the third square root of 1.3 is being calculated to determine the ‘r’ value.

1.33 = 1+r1.0913 = 1+rr = 1.0913−1r = 0.0913r = 9.13%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Answer 21

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

Answer 22

(c)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years.

(c)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years is 4.46%.

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 6

2600 2000 = (1+r) 6

1.3 = (1+r) 6

The sixth square root of 1.3 is being calculated next, to determine the value of ‘r’.

1.3 6 = 1+r1.04469 = 1+rr = 1.04469−1r = 0.04469r = 4.46%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

Answer 23

(c)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years.

Answer 24

(c)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years is 4.46%.

Answer 25

(c)

Expert Solution

Answer 26

(c)

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

FV = PV (1+r) n

2600 = 2000 (1+r) 6

2600 2000 = (1+r) 6

1.3 = (1+r) 6

The sixth square root of 1.3 is being calculated next, to determine the value of ‘r’.

1.3 6 = 1+r1.04469 = 1+rr = 1.04469−1r = 0.04469r = 4.46%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Answer 29

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

Answer 30

(d)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years.

(d)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years would be 2.65%.

Explanation of Solution

FV = PV(1+r) n

2600 = 2000 (1+r) 10

2600 2000 = (1+r) 10

1.3 = (1+r) 10

The tenth square root of 1.3 is being calculated next, in determining the value of ‘r’.

1.310 = 1+r1.02658 = 1+rr = 1.02658−1r = 0.02658r = 2.65%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

Answer 31

(d)

To determine

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years.

Answer 32

(d)

Expert Solution

Answer to Problem 20P

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years would be 2.65%.

Answer 33

(d)

Expert Solution

Answer 34

(d)

Expert Solution

Answer 35

Expert Solution

Answer 36

Explanation of Solution

FV = PV(1+r) n

2600 = 2000 (1+r) 10

2600 2000 = (1+r) 10

1.3 = (1+r) 10

The tenth square root of 1.3 is being calculated next, in determining the value of ‘r’.

1.310 = 1+r1.02658 = 1+rr = 1.02658−1r = 0.02658r = 2.65%

The relevant data has to be substituted to the future value equation in finding the applicable interest rate. The future value of the borrowed amount has to be divided by the present value as the first step. Next, the second square root of the aforesaid figure has to be derived, in simplifying the steps to find “r”. Finally, “r” could be found by subtracting one from the solved square root figure.

Answer 37

Economics Concept Introduction

Introduction:

Calculating the interest rate for lending and borrowings is essential as the value of money changes with the passage of time. The longer the time period taken for settling a fixed amount of money, the lower the interest rate. This is due to the same amount being spread over a higher number of years.

Answer 38

Ch. 3 - Prob. 1QTC Ch. 3 - Prob. 2QTC Ch. 3 - Prob. 3QTC Ch. 3 - Prob. 4QTC Ch. 3 - Prob. 5QTC Ch. 3 - Prob. 1P Ch. 3 - Prob. 2P Ch. 3 - Prob. 3P Ch. 3 - Prob. 4P Ch. 3 - Prob. 5P

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

The interest rate for an amount of $2000 borrowed, which has become $2600 at the point of re-payment at the end of two years.

Answer to Problem 20P

Explanation of Solution

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of three years.

Answer to Problem 20P

Explanation of Solution

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of six years.

Answer to Problem 20P

Explanation of Solution

The interest rate for an amount of $ 2000 borrowed, which has become $ 2600 at the point of re-payment at the end of ten years.

Answer to Problem 20P

Explanation of Solution

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