Question

What annual rate of return is implied on a $2,500 loan taken next year when $5,375 must be repaid in year 6? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

16.54%

Step-by-step explanation:

We have to applied the rate formula that is shown in the attachment.

The NPER shows the time period.

Given that,

Present value = $2,500

Future value or Face value = $5,375

PMT = $0

NPER = 6 years - 1 years = 5 years

The formula is shown below:

= Rate(NPER,PMT,-PV,FV,type)

The present value come in negative

So, after solving this, the annual rate of return is implied is 16.54%