Your friend has agreed to lend you $5,000 today if you will repay him $5,061.36 in three months. What annual interest rate is your friend charging you for this loan?
A) 1.23%
B) 5.00%
C) 2.47%
D) 5.36%
B
Explanation: B) r = (FV/PV)^(1/n) -1 = ($5,061.36/$5,000 ) ^(1/.25 ) - 1 = 5.00%.
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Consolidated financial statements:
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