ABC sells equipment to XYZ for $8,265. XYZ will pay $10,000 in two years. What is...
ABC sells equipment to XYZ for $8,265. XYZ will pay $10,000 in two years. What is the implicit interest rate in this transaction?
Homework Answers
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
10,000=8,265*(1+r/100)^2
(10,000/8,265)^(1/2)=(1+r/100)
(1+r/100)=1.1
r=1.1-1
=10%(Approx).
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