Question

3. Compute the nominal annual rate of interest compounded semi-annually on a loan of $48000 repaid in installments of $4000 at the end of every 6 months in 10 years.

Answer 1

Answer:

Rate = 51.74%

Step-by-step explanation:

Principal amount= $48000

Amount paid is done 2 times in a year for ten years

= $4000*2*10

Amount paid= $80000

A= p(1+r/n)^nt

80000= 48000(1+r/20)^(20*10)

(80000/48000)= (1+r/20)^(200)

(200)√(1.6667)= 1+ r/20

1.025870255-1= r/20

0.025870255*20= r

0.5174= r

Rate in decimal= 0.5174

In percentage= 51.74%