Info

$1,000 = $1,610.50(PVIFin for 5 years) $1,000/$1,610.50 = 0.6209 = PVIFi5 years

Now, go to Table A.3 and look across the row for year 5 until you find 0.6209. It is in the 10% column, so you would be paying a 10% rate of interest.

Example 2. A bank offers to lend you $100,000 to buy a house. You must sign a mortgage calling for payments of $8,882.73 at the end of each of the next 30 years, equivalent to roughly $740.23 per month. What interest rate is the bank charging you?

1. Recognize that $100,000 is the PV of a 30-year, $8,882.73 annuity:

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