Question

lang warehouses borrowed $100,000 from a bank and signed a note requiring 20 annual paymentsof $13,388 beginning one year from date of agreement. determine the interest rate implicit in this agreement

Answer 1

267.76%

Step-by-step explanation:

In order to find the implied interest rate we first need to find the total amount that is paid after the 20 years. We calculate this by multiplying the annual payment amount by the 20 years like so...

$13,388 * 20 = $267,760

We see that the final amount that the borrower will pay to the bank is $267,760. Now we divide this amount by the initial borrowed amount to calculate the interest rate.

$267,760 / $100,000 = 2.6776 ... multiply by 100 to get percentage

2.6776 * 100 = 267.76 %

Finally, we see that the borrower will pay an interest of 267.76% on the loan.