Basset, a furniture manufacturing company, borrowed $1 million and repaid the loan through monthly payments of $20,000 for 2 years plus a single lump-sum payment of $1 million at the end of 2 years. The interest rate on the loan was closest to: (choose one)
(a) 0.5% per month
(b) 2% per month
(c) 2% per year
(d) 8% per year
0 = 1,000,000 – 20,000(P/A,i*,24) – 1,000,000(P/F,i*,24)
Solve for i* by trial and error or Excel
i* = 2% per month (Excel)
Answer is (b) 2% per month
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