Calculating original loan amount and Effective annual rate of return.

1. In order to restructure some of its debt, General Motors decided to pay off one of its short-term loans.  If the company borrowed the money 1 year ago at an interest rate of 12% per year and the total cost of re-paying the loan was $120 million, what was the amount of the original loan?

A. PV= $107,142,857.14

B. FV=  $120,000,000.00            

C. RATE=  12%    

D. Nper=  1         

2. Two years ago I bought several boxes of flooring for $20 at an auction.  I just sold them for $30. What effective annual rate of return did I make on my investment on the basis of compound interest?

A. PV =  $20.00

B. FV =   $(30.00)

C. RATE =  22.474%

D. Nper =  2

Attached file(s)

Solution Attachment

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