Question: What annual interest rate is implied by your answer to exercise 18.1? you calculate this by dividing $10,000 by the difference of $10,00 and the

What annual interest rate is implied by your answer to exercise 18.1? you calculate this by dividing $10,000 by the difference of $10,00 and the amount you are willing to pay for the expedited handling, then taking the result to the 12th power and subtracting 1. For example, if you were willing to pay $100, the result would be ($10,000/$9,900)12 – 1 = 0.1281781, or 12 percent.

18.1 problem is: You will receive a $10,000 insurance payment in two months. if you are willing to pay for expedited handling, you can be paid in one month. Would you be willing to pay $50? $100? $200? More?

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