5.
Your bank balance is exactly $10,000. Three years ago you deposited $7,938 and have not touched the account since. What annually compounded rate of interest has the bank been paying?
Group of answer choices
8.65%
26.00%
8.00%
6.87%
6.
Which of the following interest rates will come closest to doubling invested money in five years?
Group of answer choices
13%
14%
15%
16%
5. Present value = Amount three years ago = PV = $7938
Time period = n = 3 years
Future value = Amount after three years = FV = $1000
Annual compounded rate = r
Future value is calculated using the formula:
FV = PV*(1+r)n
10000 = 7938*(1+r)3
1+r = (10000/7938)1/3 = 1.0800146215799
r = 1.0800146215799 - 1 = 0.0800146215799 ~ 8.00% (Rounded to two decimals)
Answer 5 -> 8.00%
6. Suppose we have $1 and it doubles to $2 in 5 years
Present Value = PV = $1
Future value = FV = $2
Time period = n = 5 years
Interest rate = r
Future value is calculated using the formula:
FV = PV*(1+r)n
2 = 1*(1+r)5
1+r = (2/1)1/5 = 1.14869835499704
r = 1.14869835499704 - 1 =14.869835499704% ~ 15% (Rounded to nearest percentage)
Answer 6 -> 15%
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