1. Your cousin just came home from a poker tournament in Las Vegas and is now trying to
pay off a gambling debt of $5,000. You have agreed to pay off the debt for him today,
and in return he has agreed to pay you $250 per month over the next two years with
payments beginning immediately. What is the effective annual interest rate you are
charging him?
A) 19.75%
B) 19.86%
C) 21.77%
D) 22.26%
E) 23.45%
Answer C
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