A Corporation is contemplating the purchase of a piece of equipment. The Corporation can either buy it at Joe's Equipment Shop, which will finance the purchase with a special rate of interest or at Big Box Retailer, where they have to pay cash but the price of the equipment is lower. Joe's Equipment Shop has offered the Corporation the following "special deal."

Face value $67,000$

Coupon rate $1\mathrm{.}6\%$

Market rate $???$

Term of note $7$

They could by it at Big Box Retailer for the following:

Fair value of the equipment $47,000$

Assuming equal annual payments of principal and interest, what is the market rate of interest Joe's Equipment Shop is charging?

Answer rating: 100% (QA)

To determine the market rate of interest that Joes Equipment Shop is charging we can use the present ... View the full answer