Question

Joe and Mary expect to need a new washer and dryer in 4 years. They have...

Joe and Mary expect to need a new washer and dryer in 4 years. They have $1,000 today and figure they will need $1,500 4 years from now. What interest rate will they need to earn to buy the washer and dryer?

Homework Answers

Answer #1

The interest rate needed can be calculated with help of below PV - FV formula-

FV = PV ( 1 + r )n

where,

FV = future value

PV = present value

r = rate of interest

n = no. of years

Here,

FV = $1,500 , PV = $1,000 , n = 4 years

We need to find r.

FV = PV ( 1 + r )n

1500 = 1000 ( 1 + r)4

1500 / 1000 = ( 1 + r)4

1.5 = ( 1 + r)4

Taking 4th root of 1.5 , we get-

1.10668191970032 = 1 + r

r = 1.10668191970032 - 1

r = 0.10668192

= 10.67 % (approx)

Interest rate will they need to earn to buy the washer and dryer is 10.67 %

Hope it helps!

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume that 4 years from now you will need $1,000. Your bank compounds interest at an...
Assume that 4 years from now you will need $1,000. Your bank compounds interest at an 8% annual rate. a. How much must you deposit 1 year from now to have a balance of $1,000 4 years from now? b. If you want to make equal payments at Years 1 through 4 to accumulate the $1,000, how much each of the 4 payments be? c. If your father were to offer either to make the payments calculated in part b...
The user wants to save money to buy a new car 10 years from today. Have...
The user wants to save money to buy a new car 10 years from today. Have the user input the amount that they can invest at the start of each year and the price of the car that they want to buy. What annual interest rate will they need to earn in order to be able to buy the car 10 years from today? Note: This question is from excel for accounting, so the calculation should be made in an...
Al and Mary have been married for 10 years and live in New York. Mary works...
Al and Mary have been married for 10 years and live in New York. Mary works as an accountant and earned $150,000 in salary. They earned interest income in a joint savings account of $300. Also, they have municipal bond interest of $1,000 from the city of Orlando Florida. They sold a vacation home for $95,000. They purchased that property 3 years at a cost of $90,000. In addition, they sold shares of EOX for $45,000. They purchased the shares...
Mary and Joe want to send their six (6) year old daughter Sarah to College when...
Mary and Joe want to send their six (6) year old daughter Sarah to College when she reaches the age of 18. They want to pay for her four (4) year education at a local college. The current tuition today is $8,200 annually. The couple estimates that college costs will continue to inflate at 6%, and that they can earn 8% after-tax on their invested assets. How much do they need to Invest Today to open a new 529 Plan...
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase...
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,000 and sell its old washer for $2,000. The new washer will last for 6 years and save $1,500 a year in expenses. The opportunity cost of capital is 16%, and the firm’s tax rate is 21%. a. If the firm uses straight-line depreciation over a 6-year life, what are the cash flows of the project in years 0 to 6?...
You need to have 48,334 dollars to buy a new car 6 years from now. How...
You need to have 48,334 dollars to buy a new car 6 years from now. How much do you need to save at the end of each month if your savings account pays 4% per year, compounded quarterly?
Suppose that all investors expect that interest rates for the 4 years will be as follows:...
Suppose that all investors expect that interest rates for the 4 years will be as follows: Year Forward Interest Rate 0 (today)3 % 1 4 % 2 5 % 3 6 % What is the price of 3-year zero-coupon bond with a par value of $1,000? Multiple Choice $889.08 $816.58 $772.18 $765.55 None of the options are correct.
This question has two parts. A company will need to have $3,000 four years from now...
This question has two parts. A company will need to have $3,000 four years from now to purchase new equipment. It plans to get this money through four equal investments, with the first investment beginning one year from now. a. If the company can earn an annual interest of 10%, how much should the company invest per year? b. In an different scenario, the two changes listed below are to occur today and will continue throughout the next four years....
2 year(s) ago, Mary invested 32,663 dollars. She has earned and will earn compound interest of...
2 year(s) ago, Mary invested 32,663 dollars. She has earned and will earn compound interest of 9.95 percent per year. In 1 year(s) from today, Albert can make an investment and earn simple interest of 4.91 percent per year. If Albert wants to have as much in 6 years from today as Mary will have in 6 years from today, then how much should Albert invest in 1 year(s) from today? 1 year(s) ago, Goran invested 56,351 dollars. He has...
Question 2 2a) Suppose a risk-free bond promises to pay $2,249.73 in 4 years.  If the going...
Question 2 2a) Suppose a risk-free bond promises to pay $2,249.73 in 4 years.  If the going risk-free interest rate is 3.5%, how much is the bond worth today?   Nper Rate PMT FV PV 2b) Suppose you can buy a U.S. Treasury bond which makes no payments until the bond matures 10 years from now, at which time it will pay you $1,000. What interest rate would you earn if you bought this bond for $585.43?   Nper PMT PV FV Rate...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT