Como Company borrowed $4,550 from its bank.Como will repay $7,000 in five years.What is the approximate interest rate that Como will incur on this loan,assuming annual compounding?
A)9%
B)11%
C)13%
D)65%

Question

Quizplus · Accepted Answer

The correct answer is A because the interest rate is approximately 9%. The formula for calculating the interest rate is: I = (FV - PV) / PV * n, where I is the interest rate, FV is the future value, PV is the present value, and n is the number of years. In this case, the future value is $7,000, the present value is $4,550, and the number of years is 5. Plugging these values into the formula, we get: I = (7000 - 4550) / 4550 * 5 = 0.09, or 9%.

Como Company Borrowed $4,550 from Its Bank