The Really Expensive Bank Inc is offering a special deal. You may borrow $1,000 today and...
The Really Expensive Bank Inc is offering a special deal. You may borrow $1,000 today and make payments of $20 per week, at the end of each week for the next 2 years to pay off the loan. What is the rate of interest is charging you?
Solve for (N I PV PMT FV)
Homework Answers
Borrowing = $ 1000, Weekly Payments = $ 20, Tenure = 2 years or (2 x 52) = 104 weeks, Number of Weekly Payments = 104
Let the rate of interest be i %
Therefore, 1000 = 20 x (1/i) x [1-{1/(1+i)^(104)}]
using excel's goal seek function/ a financial calculator to solve the above equation, we get:
i = 0.01626479 or 1.626479 % ~ 1.626 % per week
Annual Rate = 52 x 1.626 = 84.578 %
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