Question

s portfolio of​ lending, and the average length on its loans is 5 years. If you were to apply to Blue Angel for a ​$168 comma 000 ​loan, what is the annual percentage rate you would have to pay for this​ loan?Blue Angel Investors has a success ratio of 10 % with its venture funding. Blue Angel requires a rate of return of 19.1 % for its portfolio of​ lending, and the average length on its loans is 5 years. If you were to apply to Blue Angel for a ​$168 comma 000 ​loan, what is the annual percentage rate you would have to pay for this​ loan?

Answer 1

Answer:

19.10%

Explanation:

The computation of annual percentage rate is shown below:-

Your loan rate states if one out of ten succeeds, after five years, so the nine failure will cover, and if the Blue Angel makes 10 loans of $168,000 each and needs a return of 19.1% on its portfolio of lending, then given amount will have to be accrued after five years.

= Value × (1 + interest rate)^number of years

= $168,000 × (1 + 0.191)^5

= $168,000 × 2.396397222

= $402,594.73

Now the annual percentage rate is

= (Future value  ÷ value)^1 ÷ number of years - 1

= ($402,594.73 ÷ $168,000)^1÷5 - 1

= 19.09999981

or

= 19.10%