A 10 year loan of $2,000 is repaid with payments the end of each year. There are 2 options: (i) Equal annual payments at an annual effective rate of 8.07%; (ii) Repayments of the principal of $200 each year plus interest on the outstanding balance at an effective rate of i%. The sum of all payments under each option is the same. What is i?

A 10 year loan of $2,000 is repaid with payments the end of each year. There are 2 options: (i) Equal annual payments at an annual effective rate of 8.07%; (ii) Repayments of the principal of $200 each year plus interest on the outstanding balance at an effective rate of i%. The sum of all payments under each option is the same. What is i?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 15P

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