A borrower owes \$5000 today and has promised to pay \$1900 at the end of the next three years to repay the loan. Determine the effective annual interest rate on the loan. What is the outstanding balance immediately after the second payment?
For the effective annual interest rate I get a negative interest. I am not sure where I have gone wrong. And I am not sure on how to find the second part of the question( outstanding balance). Any help will be appreciated.
a) Effective annual interest rate:
$ PV= FV/(1+i)^t $
$ 5,000=(1900)/(1+i)^3 $
$ i=-0.275 $