Calculate the effective interest rate on the loan

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Reference no: EM13926733

1. A $1 million loan requires five end-of-year equal payments of $284,333.

a. Calculate the effective interest rate on this loan.

b. How much interest (in dollars) is paid over the life of this loan?

2. U.S. Fax has been granted a loan from a commercial finance company for $1 million at a stated interest rate of 10 percent. The loan requires that interest payments be made at the end of each of the next 5 years. At the end of 5 years, the entire loan balance must be repaid. The finance company requires U.S. Fax to pay a $25,000 loan-processing fee at the time the loan is approved. What is the effective cost of this loan?

Reference no: EM13926733

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