Qiang places the amount of $98 in a special bank account that guarantees to provide $188 in 5 years. What rate of return would Qiang earn on this opportunity?
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
188=98*(1+r/100)^5
(188/98)^(1/5)=(1+r/100)
(1+r/100)=1.1392
r=1.1392-1
=13.92%(Approx).
Qiang places the amount of $98 in a special bank account that guarantees to provide $188...
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