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 | |||||||
$ | 300 | 4 | % | $ | 380 | |||||
420 | 18 | 1,394 | ||||||||
45,000 | 19 | 237,520 | ||||||||
44,261 | 25 | 703,627 | ||||||||
We use the formula
A=P(1+r/100)^n
Where A=future value
P=present value
R=rate of return
N=time period
1.
380=300(1+r/100)^4
(380/300)^(1/4)=1+r/100
Hence 1+r/100=1.0609
Hence r=(1.0609-1)*100
=6.09%
2
1394=420(1+r/100)^18
(1394/420)^(1/18)=1+r/100
1+r/100=1.0689
Hence r=(1.0689-1)*100
=6.89%
3.
237520=45000(1+r/100)^19
(237520/45000)^(1/19)=1+r/100
1+r/100=1.0915
Hence r=(1.0915-1)*100
=9.15%
4.
703627=44261(1+r/100)^25
(703627/44261)^(1/25)=1+r/100
1+r/100=1.117
Hence r=(1.117-1)*100
=11.7%
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