Question
In: Accounting
Interest rate on an investment
Ken Francis is offered the possibility of investing $2,745 today; in return, he would receive $10,000 after 15 years. What is the annual rate of interest for this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "PV of a single amount" to 4 decimal places and percentage answer to the nearest whole number.)
| Present Value | / | Future Value | = | p (PV of a Single Amount) | Interest Rate | |
| / | ||||||
Solutions
Expert Solution
PV of Single Sum = PV of $1 factor X Future Value PV of Single Sum = PV of $1 factor (n=8, i= ?) Future Value = PV of $1 factor (n=8,i= ?) $9,725 $18,000 0.5403 = PV of $1 factor (n=8,i= ?)
The annual interest rate for this investment is 8%
In Present Value of $1, where n = 15 and p = $2,745 / $10,000 = 0.2745, the i = 9%
| Present Value | / | Future Value | = | p (PV of a Single Amount) | Interest Rate | |
| $2,745 | / | $10,000 | = | 0.2745 |
9 | % |
devender singh answered 2 years agoRelated Solutions
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