If a person is going to borrow $30,000 for a car and pay it off in monthly payments of $566.14 for 5 years the internal rate of return is
A)0%.
B)5%.
C)10%.
D)15%.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) can be found using the formula for the present value of an annuity, which equates the present value of the loan amount to the present value of the annuity payments. The correct IRR in this case is approximately 5%, as it is the interest rate that makes the present value of the monthly payments over 5 years equal to the loan amount of $30,000.

If a Person Is Going to Borrow $30,000 for a Car