What is the implied interest rate if you borrow $85 000 and promise to pay back $201 229 at the end of 10 years?
A)9% p.a.
B)18% p.a.
C)11% p.a.
D)13% p.a.

Question

Quizplus · Accepted Answer

The implied interest rate can be calculated using the formula:Implied interest rate = (Future value / Present value)^(1/n) - 1where:Future value = $201,229Present value = $85,000n = 10 yearsImplied interest rate = (201,229 / 85,000)^(1/10) - 1 = 0.09 or 9% p.a.

What Is the Implied Interest Rate If You Borrow $85