Question

(Compound value solving for r​) At what annual rate would the following have to be​ invested? a. ​$500 to grow to ​$1 comma 052.43 in 11 years b. ​$290 to grow to ​$460.19 in 6 years c. ​$50 to grow to ​$1 comma 082.24 in 22 years d. ​$216 to grow to ​$289.06 in 5 years

Answer 1

a.Information provided:

Present value= $500

Future value= $1,052.43

Time= 11 years

The interest rate is calculated by entering the below in a financial calculator:

PV= -500

FV= 1,052.43

N= 11

Press the CPT key and I/Y to compute the interest rate.

The value obtained is 7.

Therefore, the annual interest rate is 7%.

b.Information provided:

Present value= $290

Future value= $460.19

Time= 6 years

The interest rate is calculated by entering the below in a financial calculator:

PV= -290

FV= 460.19

N= 6

Press the CPT key and I/Y to compute the interest rate.

The value obtained is 7.9999.

Therefore, the annual interest rate is 8%.

c.Information provided:

Present value= $50

Future value= $1,082.24

Time= 22 years

The interest rate is calculated by entering the below in a financial calculator:

PV= -50

FV= 1,082.24

N= 22

Press the CPT key and I/Y to compute the interest rate.

The value obtained is 15.

Therefore, the annual interest rate is 15%.

d. Information provided:

Present value= $216

Future value= $289.06

Time= 5 years

The interest rate is calculated by entering the below in a financial calculator:

PV= -216

FV= 289.06

N= 5

Press the CPT key and I/Y to compute the interest rate.

The value obtained is 6.

Therefore, the annual interest rate is 6%.

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