Question

Estimating the annual interest rate with an ordinary

annuity.

Fill in the missing annual interest rates in the following table for an ordinary annuity stream.

Number of Payments or Years		Annual Interest Rate	Future Value		Annuity		Present Value
1010		​?	​$0.000.00		​$500.00500.00		​$2 comma 307.382,307.38
1616		​?	​$10 comma 302.6410,302.64		​$401.31401.31		​$0.000.00
4040		​?	​$0.000.00		​$2 comma 074.172,074.17		​$40 comma 000.0040,000.00
9090		​?	​$1 comma 036 comma 494.751,036,494.75		​$650.00650.00		​$0.000.00

Number of Payments or Years		Annual Interest Rate	Future Value		Annuity		Present Value
1010		nothing​% ​(Round to two decimal​ places.)	​$0.000.00		​$500.00500.00		​$2 comma 307.382,307.38

1616

nothing​% ​ (Round to two decimal​ places.)

​$10 comma 302.6410,302.64

​$401.31401.31

​$0.000.00

4040

nothing​% ​(Round to two decimal​ places.)

​$0.000.00

​$2 comma 074.172,074.17

​$40 comma 000.0040,000.00

9090

nothing​% ​(Round to two decimal​ places.)

​$1 comma 036 comma 494.751,036,494.75

​$650.00650.00

​$0.000.00

Answer 1

	no of years	Future value	annuity	present value	Formula	value
1-	10	0	500	2307.38	Using rate function in MS excel =rate(nper,pmt,pv,fv,type) nper =10 pmt = -500 pv = 2307.38 ,Fv =0 type = 0	RATE(10,500,-2307.38,0,0)	17.26%
2-	16	10302.64	-401.31	0	Using rate function in MS excel =rate(nper,pmt,pv,fv,type) nper =16 pmt = -401.31 pv = 0 ,Fv =10302.64 type = 0	RATE(16,-401.31,0,10302.64,0)	6.00%
3-	40	0	2074.17	-40000	Using rate function in MS excel =rate(nper,pmt,pv,fv,type) nper =16 pmt = -401.31 pv = 0 ,Fv =10302.64 type = 0	RATE(40,2074.17,-40000,0,0)	4.18%
4-	90	1036494.75	-650	0	Using rate function in MS excel =rate(nper,pmt,pv,fv,type) nper =16 pmt = -401.31 pv = 0 ,Fv =10302.64 type = 0	RATE(90,-650,0,1036494.75,0)	5.00%