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9 December, 00:39

Blue Angel Investors has a success ratio of 10 % with its venture funding. Blue Angel requires a rate of return of 19.1 % for its portfolio of lending, and the average length on its loans is 5 years. If you were to apply to Blue Angel for a $168 comma 000 loan, what is the annual percentage rate you would have to pay for this loan? Blue Angel Investors has a success ratio of 10 % with its venture funding. Blue Angel requires a rate of return of 19.1 % for its portfolio of lending, and the average length on its loans is 5 years. If you were to apply to Blue Angel for a $168 comma 000 loan, what is the annual percentage rate you would have to pay for this loan?

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Answers (1)
  1. 9 December, 03:05
    0
    19.10%

    Explanation:

    The computation of annual percentage rate is shown below:-

    Your loan rate states if one out of ten succeeds, after five years, so the nine failure will cover, and if the Blue Angel makes 10 loans of $168,000 each and needs a return of 19.1% on its portfolio of lending, then given amount will have to be accrued after five years.

    = Value * (1 + interest rate) ^number of years

    = $168,000 * (1 + 0.191) ^5

    = $168,000 * 2.396397222

    = $402,594.73

    Now the annual percentage rate is

    = (Future value : value) ^1 : number of years - 1

    = ($402,594.73 : $168,000) ^1:5 - 1

    = 19.09999981

    or

    = 19.10%
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