What is the effective interest cost of the loan

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A $10 million, 5-year loan bears an interest rate of 7 percent. The loan repayment plan calls for five annual end-of-year payments. Each payment is to include an equal amount of principal repayment ($2 million per year) plus accrued interest.

Set up the amortization schedule for this loan. Be sure to distinguish between the interest and the principal portions of each annual payment. What is the effective interest cost of this loan?

Reference no: EM131334948

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