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## 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

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