Your father loans you $12,000 to make it through your senior year. His repayment schedule requires payments of $1401.95 at the end of year for the next 15 years. What interest rate is he charging you?
A) 7.5%
B) 8.0%
C) 8.5%
D) 7.0%

Question

Quizplus · Accepted Answer

The loan is an annuity problem where the present value of the annuity (loan amount) is $12,000, and the annuity payment is $1401.95 for 15 years. Using the formula for the present value of an annuity, the interest rate that equates these values is approximately 8.0%.

Your Father Loans You $12,000 to Make It Through Your