Question

If Colleen Mooney invests $4,527.13 now and she will receive $14,300 at the end of 17 years, what annual rate of interest will Colleen earn on her investment? (Hint: Use Table 3.) (Round answer to 0 decimal places, e.g. 25%.) Click here to view the factor table Future Value of 1 Click here to view the factor table Future Value of an Annuity of 1 Click here to view the factor table Present Value of 1 Click here to view the factor table Present Value of an Annuity of 1 (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Annual rate of interest %

Answer 1

The Annual rate of interest = “ 7% “

Here, We have the Investment Value, Future Value of the Investment and Number of years of Investment. We need to calculate the Interest Rate (r) at which $4,527.13 become $14,300 at the end of 17 Years

Future Value = Present Value x Future Value Factor

$14,300 = $4,527.13 x (FVF r , 17 Years )

(FVF r , 17 Years ) = $14,300 / $4,527.13

(FVF r , 17 Years ) = 3.15873

Future Value Factor = 3.15873

From the Future Value Factor Table, We can find that the Interest Rate corresponding to the factor of 3.15873 for 17 Years will be 7%