You want to borrow $96,000 from your local bank to buy a new sailboat

Finance Aug 05, 2020

You want to borrow $96,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $2,000 for the next 5 years. Given this information, what is the monthly interest rate the bank will charge on this loan?

Expert Solution

Computation of Monthly Interest Rate using Rate Function in Excel:

=rate(nper,pmt,-pv,fv)

Here,

Rate = Monthly Interest Rate = ?

Nper = 5 Years*12 = 60 Months

PMT = $2,000

PV = $96,000

FV = 0

Substituting the values in formula:

=rate(60,2000,-96000,0)

Rate or Monthly Interest Rate = 0.76%

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote