Homework Answers
Answer:
The interest rate = 5%
Working Note:
| Values from question | |||
| Fair value of damaged inventory | $ 562,640.00 | ||
| Semi Annual Installment | $ 41,400.00 | ||
| No.of years | $ 10.00 | ||
| Compounding | $ 2.00 | ||
| Present Value of Annuity (PVA) = A * ( 1+r)^n-1 / r*(1+r)^n | |||
| A = Annuity | |||
| r= Rate of Interest | |||
| n= No.of years | |||
| 562,640 = 41400 * (1+r)^10*2 - 1 / r*(1+r)^10*2 | |||
| 562,640 / 41400 = (1+r)^20 - 1 / r*(1+r)^20 | |||
| 13.590 = (1+r)^20 - 1 / r*(1+r)^20 | |||
| r = 5% | |||
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