A person needs $5,000 in four years. The person can afford to deposit $275 every three...
A person needs $5,000 in four years. The person can afford to deposit $275 every three months into an account. Determine to the nearest .01% the nominal rate of interest converted quarterly that is needed to accumulate $5,000.
Homework Answers
Ans 6.72%
| P = | Periodic payments |
| r = | rate of interest |
| n = | no of years |
| Future Value of Annuity = | P ( (1 + r)n - 1 ) / r |
| 5000 = | 275* ((1 + r%/4)^16 - 1) / (r%/4) |
| 5000 / 275 = | ((1 + r%/4)^16 - 1) / (r%/4) |
| 18.1818181818182 = | ((1 + r%/4)^16 - 1) / (r%/4) |
| r = | 6.72% |
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