Question

4. WITHOUT the use of the TVM Solver, use an appropriate formula to determine the annual interest rate of an account if the account earns interest semiannually and $18,332 grows to $20,559 in six years. No money is deposited or withdrawn during the six years. Show, in detail, how you arrive at your answer. Show intermediate steps that clearly indicate that you did not use the TVM Solver. (5 points)

Answer 1

A = P. (1+2) ot Whence PF n = R= t = compound Principal Amount Number of time Interest Rate of Interest. No. of years. 1 2X 20,559 = 18,332 (1+ 2)2 - 20.559 18,332 + 20, 559 18, 332 - ) + => 71.121482 = 1 + 2 1.0096 - 1+ 1.0096 -1 = R مام مام => = 0.0096 = ? R: 0.0192 So Half yearly Interest Rate 1.927 Annual Interest Rate 1.92x2 = 3.84 7.