Stated Yield

Arc manuf. borrowed $100M over a ten year period. If Arc makes annual payments of $15M, calculate the approximate stated annual interest rate. Indicate whether the effective annual interest rate would be same or higher. Answer: Stated Rate = 8% Effective Rate = Same

no compounding means no difference in rates.

thanks, but… where does the 8 come from though?

pv = 100M pmt = -15M n = 10 compute i = 8.144

I did a time value calculation and got 8.14% as the answer. N = 10 PMT = -15 PV = 100 Solve for I/Y