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mbaaspirant80
Joined: 14 Apr 2017
Last visit: 26 Aug 2020
Posts: 245
Given Kudos: 25
Location: India
sandeep : sharma
Concentration: International Business, Entrepreneurship
Schools: INSEAD Jan '17 IMD Jan'18 CBS '19
GPA: 3.9
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Updated on: 30 Sep 2023, 00:27
Originally posted by mbaaspirant80 on 28 Aug 2017, 08:37.
Last edited by BottomJee on 30 Sep 2023, 00:27, edited 5 times in total.
Last edited by BottomJee on 30 Sep 2023, 00:27, edited 5 times in total.
Moved to new forum
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Same total
interest payments: 8.8% $190,000 loan requires
twice the interest: 7.6%
interest payments: 8.8% $190,000 loan requires
twice the interest: 7.6%
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
35%
(medium)
Question Stats:
77% (03:14) correct
23%
(03:24)
wrong
based on 610
sessions
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A business needs a $240,000 loan for one year and has two options to decide between. Option 1 is a fixed rate loan for the entire amount, with a simple annual interest rate of 5%. Option 2 involves two loans: a fixed rate loan for $190,000, with a simple annual interest rate of 4%, and a second fixed rate loan for $50,000, with a simple annual interest rate of r%. Both options have otherwise identical terms and require payment in full of interest and principal at the end of the year.
In the first column, identify the interest rate r% at which the two options require the same total interest payment. In the second column, identify the interest rate r% at which the annual interest on the $190,000 loan in Option 2 would be exactly twice the annual interest on the $50,000 loan. Make only two selections, one in each column.
In the first column, identify the interest rate r% at which the two options require the same total interest payment. In the second column, identify the interest rate r% at which the annual interest on the $190,000 loan in Option 2 would be exactly twice the annual interest on the $50,000 loan. Make only two selections, one in each column.
|
Same total interest payments |
$190,000 loan requires twice the interest |
Interest rate r% |
| 4.4% | ||
| 5.2% | ||
| 6.1% | ||
| 7.6% | ||
| 8.8% | ||
| 9.5% |
ShowHide Answer
Official Answer
Same total
interest payments: 8.8% $190,000 loan requires
twice the interest: 7.6%
interest payments: 8.8% $190,000 loan requires
twice the interest: 7.6%
01 Sep 2017, 21:33
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i want to know the answer for this question
i got 8.8% for first column and 7.6% for second column
i got 8.8% for first column and 7.6% for second column
04 Feb 2020, 09:02
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1)8.8%, since both the options have equal interest so:
240000*5= 190000*4 + 50000*r
r=8.8%
2)190000*4 =2*50000*r, so r=7.6%
Posted from my mobile device
240000*5= 190000*4 + 50000*r
r=8.8%
2)190000*4 =2*50000*r, so r=7.6%
Posted from my mobile device
