Question

you lend a friend 10,000 dollars for which your friend will repay you 27,027 dollars at the end of 5 years. What interest rate are you charging your friend?

Answer 1

The interest rate is "21.999%".

Step-by-step explanation:

The given values are:

Amount lent,

= 10,000

Amount repaid,

= 27,027

Years (n),

= 5

As we know,

⇒
`Amount \ repaid = Amount \ lent* (1+r)^n`

On substituting the given values, we get

⇒
`27,027=10,000* (1+r)^5`

⇒
`(27,027)/(10,000)=(1+r)^5`

⇒
`2.7027=(1+r)^5`

⇒
`1+r = (2.7027)^((1/5))`

⇒
`1+r=1.21999`

On subtracting "1" from both sides, we get

⇒
`1+r-1=1.21999-1`

⇒
`r=0.21999`

i.e.,

⇒
`r=21.999 \ percent`