Question

If Colleen Mooney invests $3,400.25 now and she will receive $13,500 at the end of 16 years, what annual rate of interest will Colleen earn on her investment? (Hint: Use Present value of 1 factor table.) (Round answer to 0 decimal places, e.g. 25%.)

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(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Annual rate of interest

%

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Answer 1

Correct Answer:

Annual Rate of interest = 9%

Working:

A =	P*(1+R)^N
13500 =	3400.25*(1+R)^16
13500/3400.25 =	(1+R)^16
3.970296	(1+R)^16
(3.970296)^(1/16)	1+R
1.09	1+R
1.09 - 1.00	R
0.09	R

End of answer.

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