Assume that you can borrow $175,000 for one year from a local

commercial bank.

a. The bank loan officer offers you the loan if you agree to pay

$16,000 in interest plus repay the $175,000 at the end of one year.

What is the percent interest rate or effective cost?

b. As an alternative you could get a one-year, $175,000 discount loan

at 9 percent interest. What is the percent interest rate or effective cost?

c. Which one of the two loans would you prefer?

d. At what discount loan interest rate would you be indifferent

between the two loans?

My question:

I can't do the D part. For A-C, my answers are as follows:

a. 16,000/175,000 = 9.14%

b. 15,750/159,250 = 9.89%

c. I will prefer Loan A because it has the lowest cost.

d. ? I have tried 0.0914 = x/(175,000-x) but my answer feels wrong, and I don't know if this is the right approach.

Help would be appreciated, thank you :)