Question
In: Finance
PROBLEM 5-3 COMPOUND VALUE SOLVING FOR ANNUAL RATE At what annual rate would the following lump...
| PROBLEM 5-3 | |||
| COMPOUND VALUE SOLVING FOR ANNUAL RATE | |||
|
At what annual rate would the following lump sums have to be
invested to reach the future values shown? a. $500 to grow to $1,948.00 in 12 years b. $300 to grow to $422.10 in 7 years c. $50 to grow to $280.20 in 20 years d. $200 to grow to $497.60 in 5 years |
|||
| SOLUTION | |||
| a. $500 to grow to $1,948.00 in 12 years | |||
| Invest | $500.00 | ||
| Future value | $1,948.00 | ||
| Number of years | 12 | ||
| Annual rate | |||
| b. $300 to grow to $422.10 in 7 years | |||
| Invest | $300.00 | ||
| Future value | $422.10 | ||
| Number of years | 7 | ||
| Annual rate | |||
| c. $50 to grow to $280.20 in 20 years | |||
| Invest | $50.00 | ||
| Future value | $280.20 | ||
| Number of years | 20 | ||
| Annual rate | |||
| d. $200 to grow to $497.60 in 5 years | |||
| Invest | $200.00 | ||
| Future value | $497.60 | ||
| Number of years | 5 | ||
| Annual rate | |||
| Requirements: | |||
Solutions
Expert Solution
a.Information provided:
Present value= 500
Future value= $1,948
Time= 12 years
The interest rate is calculated by entering the below in a financial calculator:
PV= -500
FV= 1,948
N= 12
Press the CPT key and I/Y to compute the interest rate.
The value obtained is 12.14.
Therefore, the interest rate is 12.14%.
b. Information provided:
Present value= $300
Future value= $422.10
Time= 7 years
The interest rate is calculated by entering the below in a financial calculator:
PV= -300
FV= 422.10
N= 7
Press the CPT key and I/Y to compute the interest rate.
The value obtained is 4.9989
Therefore, the interest rate is 4.9989%
5%.
c. Information provided:
Present value= 50
Future value= $280.20
Time= 20 years
The interest rate is calculated by entering the below in a financial calculator:
PV= -50
FV= 280.20
N= 20
Press the CPT key and I/Y to compute the interest rate.
The value obtained is 8.9996.
Therefore, the interest rate is 8.9996%
9%.
d. Information provided:
Present value= 200
Future value= $497.60
Time= 5 years
The interest rate is calculated by entering the below in a financial calculator:
PV= -200
FV= 497.60
N= 5
Press the CPT key and I/Y to compute the interest rate.
The value obtained is 19.9969
Therefore, the interest rate is 19.9969%
20%.
In case of any query, kindly comment on the solution.
jeff jeffy answered 11 months agoRelated Solutions
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