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Matthew needed money for some unexpected expenses, so he borrowed $5,899.30 from a friend and agreed to repay the loan in eight equal installments of $950 at the end of each year. The agreement is offering an implied interest rate of .

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Answer:

The correct answer is 6%.

Explanation:

According to the scenario,  the calculation is shown in the excel attachment:  

Given that,  

Present value = $5,899.30

Assuming figure - Future value or Face value = $0

PMT = $950

NPER = 8 months

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative  

So, after solving this,  the implied interest rate is 6%.

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