Consolidated Freightways is financing a new truck with a loan of $60,000 to be repaid in six annual end-of-year installments of $13,375. What annual interest rate is Consolidated Freightways paying?

Question

Quizplus · Accepted Answer

The loan is an annuity problem where the present value of the annuity (loan amount) is $60,000, and the annuity payment is $13,375 for six years. Using the formula for the present value of an annuity, the interest rate that equates these values is approximately 9%.

Consolidated Freightways Is Financing a New Truck with a Loan