Solve the following Economics Engineering question based on the data provided. (Note: Do not use the interest table)
Homework Answers
Pv=A[1-(1+r)^n] /r
100000=15000[1-(1+r)^10]/r
100000/15000=[1-(1+r)^10]/r
6.67=[1-(1+r)^10]/r
Now look in the present value annuity table where, in 10 year 6.67 amount comes.
So, here between 8% and 9% 6.67 comes.
8%=6.7101 and 9%=6.4177
Now for getting exact percentage we can use following formula.
Interest rate
=LDF +[(LDPV-PV) /(LDPV-HDPV)] (HDF-LDF)
=8 +[(6.7101 - 6.6667)/(6.7101-6.4177)](9-8)
=8+[(0.0434) /(0.2924)] 1
=8+(0.1434)1
=8.15
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