Find the effective annual rate of interest

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A. Jane wants to buy a house and approaches the bank to borrow $606,000. The bank agrees to lend her the money and quotes a monthly repayment amount of $5,000 with no additional loan fees. If the bank's quoted annual interest rate is 5%p.a compounding monthly calculate the number of full month-end repayments using Excel. (answer by rounding down to whole number eg 50).

B. Find the effective annual rate of interest (as a %, 2 decimal places) at which an amount of $2,000 today will accumulate to $4900 in 8 years.
(Solve using excel =RATE function; Answer in percentage rounded to two decimals without the % sign e.g. 1.8891 is 1.89)

Reference no: EM132499357

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