Answer to Question #265099 in Financial Math for Verna

Question

I borrow £5000 and agree to pay back £6000 after 18 months. Whatever is the annual rate of compound interest?

What is asked:

What are given:

What is the answer:

Answer 1

Variable Asked:

Annual Rate of Compound Interest=i

Borrowed amount (p)=5000

Repayment amount(A)=6000

Period (years)t=$\frac{months}{12}$

$=\frac{18}{12}=1.5$

$A=p(1+i)^t\\6000=5000×(1+i)^{1.5}\\1+i=(\frac{6000}{5000})^{\frac{1}{1.5}}\\ 1+i=1.129243\\i=1.129243−1\\i=0.129243\\i=12.9243\%$

So annual rate compounded is 12.9243%