You take out an installment loan to purchase a fishing boat costing $3,900. You make a down payment of $1,000 and finance the ba
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The returns of a capital amount to a compensation rate for depositing the money, to calculate these returns an interest rate is used by which the deposited capital is multiplied, in this case the rate is 4%.
As the money distributed is only the product of interest, then that money is the result of multiplying the capital by the interest rate, to obtain how much money Mr. Jefferson contributed, the reverse process will have to be done.
Answers
let <em>C</em> be the capital, then :
The capital contributed by Mr. Jefferson was <em>$4,262,500</em>
Answer:
5.657%
Explanation:
Data provided:
Face value = $1,000
Current market price = $640
Time of maturity, t = 8 year
Now,
the compounding formula is given as:
Face value = Current amount ×
where,
r is the rate i.e pretax rate of debt
n is the number of times the interest is compounded i.e for semiannual n = 2
thus, on substituting the values, we get
$ 1,000= $ 640 ×
or
1.5625 =
or
= 1.0282
or
r = 0.05657
or
pretax cost of debt = 0.05657 × 100% = 5.657%