Solving for Rates What annual rate of return is implied on a $700 loan taken next year when $800 must be repaid in year 3?
A)4.55 percent
B)4.76 percent
C)6.90 percent
D)7.14 percent

Question

Quizplus · Accepted Answer

The implied annual rate of return can be calculated using the formula for compound interest: $ FV = PV \times (1 + r)^n $. Here, $ FV = 800 $, $ PV = 700 $, and $ n = 2 $ years. Solving for $ r $, we get $ r = ((800/700)^{1/2}) - 1 \approx 6.90\% $.

Solving for Rates What Annual Rate of Return Is Implied