Question

3.         Solve for the unknown interest rate in each of the following:

Present Value	Years	Future Value
$175	7	$317
$325	12	$1,080
$53,000	13	$165,200
$32,300	30	$685,000

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.317=175*(1+r/100)^7

(317/175)^(1/7)=(1+r/100)

(1+r/100)=1.0886

r=1.0886-1

=8.86%(Approx)

b.1080=325*(1+r/100)^12

(1080/325)^(1/12)=(1+r/100)

(1+r/100)=1.1053

r=1.1053-1

=10.53%(Approx)

c.165200=53000*(1+r/100)^13

(165200/53000)^(1/13)=(1+r/100)

(1+r/100)=1.0914

r=1.0914-1

=9.14%(Approx)

d.685000=32300*(1+r/100)^30

(685000/32300)^(1/30)=(1+r/100)

(1+r/100)=1.1072

r=1.1072-1

=10.72%(Approx)