## Answers

This can be solved using the Present value of annuity formula |

Present value of annuity is = P*(1-(1+r)^-n)/r |

"P" is Payment at the end of each year = $ 8,347.06/. |

Present value of annuity is = $ 85,000 |

"r" is Effective interest rate = ? |

"n" is No of years = 30 |

85000=8347.06*(1-(1+r)^-30)/r |

(1-(1+r)^-30)/r=(85000/8347.06) |

(1-(1+r)^-30)/r=10.18322619 |

(1-(1+r)^-30)=10.18322619*r |

Using trial and error, r is = 9.10% Approx. |

Answer is 9.10% Approx. |

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