What would be the interest rate on a loan of $9,981.78 that you paid off with annual payments of $2,500 for each of the next five years?
A)8.0%
B)10%
C)15%
D)21%
E)26%

Question

Quizplus · Accepted Answer

The interest rate that fits the given conditions is 8.0%. This can be determined by using the formula for the present value of an annuity or by using a financial calculator or spreadsheet to solve for the interest rate that makes the present value of the annuity payments ($2,500 annually for 5 years) equal to the loan amount ($9,981.78).

What Would Be the Interest Rate on a Loan of $9,981.78