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16 February, 22:18

Matthew needed money for some unexpected expenses, so he borrowed $2,587.09 from a friend and agreed to repay the loan in three equal installments of $950 at the end of each year. The agreement is offering an implied interest rate of

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  1. 16 February, 22:23
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    The agreement is offering an implied interest rate of 10.16%.

    Explanation:

    Matthew borrowed $2,587.09 from his friend, but he will return $2,850, as 950 x 3 = 2,850.

    Therefore, there is an excedent of $262.91, which constitutes an implied interest on the payment of the loan.

    As 2,587.09 is the 100% of the loan, we have to know the percent that 262.91 represents in order to know the interest rate. We can know it by using a crossed multiplication:

    2,587.09 = 100

    262.91 = X

    (262.91 x 100) / 2,587.09 = X

    26,291 / 2,587.09 = X

    10.16 = X

    Therefore, the implied interest rate in this loan is of 10.16%.
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Home » Business » Matthew needed money for some unexpected expenses, so he borrowed $2,587.09 from a friend and agreed to repay the loan in three equal installments of $950 at the end of each year. The agreement is offering an implied interest rate of
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