Compute the effective interest rate to the nearest percent

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1) Recently, Glenda Estes was interested in purchasing a Honda Acura. The salesperson indicated that the price of the car was either $27,600 cash, or $6,900 at the end of each of 5 years. Compute the effective interest rate to the nearest percent that Glenda would pay if she chooses to make the five annual payments.

2) Recently, property/casualty insurance companies have been criticized because they reserve for the total loss as much as 5 years before it may happen. The IRS has joined the debate because it says the full reserve is unfair from a taxation viewpoint. What do you believe is the IRS position?

Reference no: EM13877661

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