Problem 5.7 (Part Level Submission) You are in a desperate need of cash and turn
ID: 1175164 • Letter: P
Question
Problem 5.7 (Part Level Submission)
You are in a desperate need of cash and turn to your uncle who has offered to lend you some money. You decide to borrow $1,350 and agree to pay back $1,590 in two years.
(a)
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(b)
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Problem 5.7 (Part Level Submission)
You are in a desperate need of cash and turn to your uncle who has offered to lend you some money. You decide to borrow $1,350 and agree to pay back $1,590 in two years.
(a)
What annual interest rate is your uncle charging you? (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to two decimal places, e.g. 8.72%.)Rate of interest charged by uncle % Click if you would like to Show Work for this question:
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(b)
The parts of this question must be completed in order. This part will be available when you complete the part above.
Explanation / Answer
Annual interest rate charged by uncle=(future value/present value)^(1/t)-1=(1590/1350)^(1/2)-1=8.5254%