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

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

a.

231=190*(1+r/100)^4

(231/190)^(1/4)=(1+r/100)

(1+r/100)=1.0501

r=(1.0501-1)

=5.01%(Approx).

b.

854=310(1+r/100)^18

(854/310)^(1/18)=(1+r/100)

(1+r/100)=1.0579

r=1.0579-1

=5.79%(Approx).

c.

148042=34000(1+r/100)^19

(148042/34000)^(1/19)=(1+r/100)

(1+r/100)=1.0805

r=1.0805-1

=8.05%(Approx).

d.

412862=33261(1+r/100)^25

(412862/33261)^(1/25)=(1+r/100)

(1+r/100)=1.106

r=1.106-1

=10.6%(Approx).