Solving for an unknown interest rate for annuity cash flows is an iterative (or trial-and-error)process.

Question

Quizplus · Accepted Answer

Solving for an unknown interest rate for annuity cash flows requires using mathematical formulas, such as the annuity formula or present value formula, in combination with trial-and-error to find the interest rate that satisfies the equation. This process involves making educated guesses for the interest rate and adjusting until the equation is balanced. Therefore, it is an iterative process.

Solving for an Unknown Interest Rate for Annuity Cash Flows