Question

You just borrowed $15,000 from a bank. If you pay $4,000 at the end of each year over the next 5 years, you will pay off the loan. What is the interest rate on the loan?

Answer 1

(4,000 * 5) - 15,000 = 5,000

I = prt

5,000 = 15,000 * r * 5

5,000 = 75,000 * r

100(5,000 / 75,000) = r

6.67% = r

Answer 2

This is not the answer that my professor gave in his solutions. He has an interest rate of 10.425% I know it is a present value annuity, just don't know how to set up and solve for the i, the unknown.