You and your REM 400 instructor both want to purchase properties in Scarborough and you both intend to satisfy the twenty percent down requirement needed to avoid purchasing CMHC mortgage insurance. You both approach Floyd, the mortgage loan officer at the Third Bank of Oshawa to apply for a one-year maturity, zero-coupon mortgage loan to finance the rest of the $1, 000, 000.00 purchase prices for your respective properties. Floyd regards you as a riskless borrower but, once he hears your instructor is a Ryerson faculty member, recognizes him as a serious credit risk. He tells you that the one-year coupon rate on your loan will be the riskless rate of 2%. Now addressing your instructor, he tells him that, by his calculations, the current value of the credit risk posed by the instructor today is $72,549.02 on a loan with the initial balance both you and your instructor desire. Your instructor, a whiz at mortgage finance, calculates his required repayment at the one-year maturity and the corresponding risky rate on his mortgage loan and, after doing so, faints. What did the instructor calculate as the one-year rate on his mortgage?

22.00%

8.00%

14.00%

0.10%

11.25%