Question

In: Finance

At what the annual rate would the following have to be invested? a. $520 to grow...

At what the annual rate would the following have to be invested?

a. $520 to grow to $1,483.62 in 11 years ?

b. $280 to grow to $479.87 in 7 years ?

c. $50 to grow to $363.17 in 19 years ?

d. $216 to grow to $289.06 in 5 years ?

At what annual rate would $520 have to be invested to grow to $1483.62 in 11 years? Round to the nearest whole percent.

Solutions

Expert Solution

a.Information provided:

Present value= $520

Future value= $1,463.62

Time= 11 years

The annual rate is calculated by computing the yield to maturity.

Enter the below in a financial calculator to compute the annual rate:

PV= -520

FV= 1,463.62

N= 11

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

The value obtained is 9.8644.

Therefore, the annual rate is 9.86%.

b.Information provided:

Present value= $280

Future value= $479.87.

Time= 7 years

The annual rate is calculated by computing the yield to maturity.

Enter the below in a financial calculator to compute the annual rate:

PV= -280

FV= 479.87

N= 7

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

The value obtained is 8.

Therefore, the annual rate is 8%.

c.Information provided:

Present value= $50

Future value= $363.17

Time= 19 years

The annual rate is calculated by computing the yield to maturity.

Enter the below in a financial calculator to compute the annual rate:

PV= -280

FV= 479.87

N= 7

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

The value obtained is 11.

Therefore, the annual rate is 11%.

d. Information provided:

Present value= $216

Future value= $289.06

Time= 5 years

The annual rate is calculated by computing the yield to maturity.

Enter the below in a financial calculator to compute the annual rate:

PV= -216

FV= 289.06

N= 5

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

The value obtained is 6

Therefore, the annual rate is 6%.

In case of any query, kindly comment on the solution.

jeff jeffy answered 1 year ago
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