Question

Solve for the unknown interest rate in each of the following (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.):

Present Value Years Interest Rate Future Value
$190 4 % $231
310 18 854
34,000 19 148,042
33,261 25 412,862

Answer 1

Answer:A) 5.01% B)5.79% C.8.05% D)10.60%

Explanation:

Using the formula

FV = PV (1 + r)ⁿ

where

PV=present value

r=interest rate

n =number of periods/ years

FV = future value.

Making r= interest rate the subject formula to solve .

FV = PV (1 + r)ⁿ

(FV/PV)^ 1/n - 1 = r

A)( 231/190)^(1/4) -1

( 231/190)^ 0.25 -1

1.21578947^0.25 -1

1.05006116 -1

0.05006116 X 100

5.01%

B)( 854/310)^ (1/18) -1

( 854/310)^ 0.0555 -1

2.75483871^0.0555 -1

1.05785304 -1

0.05785304 X 100

5.79%

C)( 148,042/34,000)^ (1/19) -1

( 148,042/34,000)^ 0.0526 -1

4.35417647^0.0526 -1

1.08045444-1

0.08045444 X 100

8.05%

D)( 412,862/33,261)^ (1/25) -1

( 412,862/33,261)^ 0.04 -1

12.4127958^0.04 -1

1.10599913 -1

0.10599913X 100

10.60%