You have taken out a short-term serial loan (characterized by the fact that the installments on the loan are the same each term).
The loan must be repaid over five years with quarterly installments. The loan interest rate is 2% per year. We disregard other borrowing costs. In the 4th quarter of the first year, you paid interest and installments of NOK 1,700 and NOK 20,000, respectively.

1) How big was the loan you took out?

2) What is the effective annual interest rate on the serial loan?

Answer rating: 100% (QA)

We can solve this problem using the formula for the present value of an annuity PV PMT x 1 1 rn r wh... View the full answer