Posted by Dave T on January 23, 2001 at 20:07:11:
Wouldn’t the yields you suggest need a compound interest scenario?
That is if interest is compounded monthly, what yield would I have to earn to make an initial deposit of 144K grow to 160K at the end of the last period. With monthly interest credited to the account, you would need only 10.86% annually to obtain an effective annual yield of 11%.
Since, in Jonathon’s problem, the lender’s 144K is invested without any monthly payments except the lump sum payoff, I believe the yield computation should be performed with a simple arithmetic formula instead.