Answered: Solving for Rates What annual rate of…

Solving for Rates What annual rate of return is implied on a $2,100 loan taken next year when $4,800 must be repaid in year 10? Multiple Choice 8.62% 14.29% 9.62% 12.86%

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 15PROB

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Solving for Rates What annual rate of return is implied on a $2,100 loan taken next year when $4,800 must be repaid in year 10? Multiple Choice 8.62% 14.29% 9.62% 12.86%

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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