CFA Level 1: Calculate Annual Interest Rate | Test Prep

Calculate Annual Interest Rate

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Question

If you owe $5,000 today and will repay it with 8 annual payments of $900 beginning next year, what is the annual interest rate, compounded annually, that you are paying?

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Explanations

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Explanation

On the BAII Plus, press 8 N, 5000 PV, 900 +/- PMT, 0 FV, CPT I/Y. On the HP12C, press 8 n, 5000 PV, 900 CHS PMT, 0 FV, i. Note that the PMT must be entered with a sign that is opposite that given the PV.