Answer to Question 8.
Investment (Present Value) = $x
Value of Investment after 6 years (Future Value) = $2x
Time (n ) = 6
Rate (r ) = ??
Future Value = Present Value * ( 1 + r)^ n
$2x = $x * (1 + r)^ 6
2 = (1 + r)^ 6
2 ^ (1/6) = 1 + r
1.1225 = 1 + r
r = 0.1225
or r = 12%
Option C is Correct.
Answer to Question 9.
Investment (Present Value) = $1,500
Value of Investment after 1 years (Future Value) = $1,680
Time (n ) = 1
Rate (r ) = ??
Future Value = Present Value * ( 1 + r)^ n
$1,680 = $1,500 * (1 + r) ^1
1.12 = (1 + r) ^1
1.12 ^ (1/1) = 1 + r
1.12 = 1 + r
r = 0.12 or 12.00%
Option B is Correct.
Answer to Question 10.
Amount deposited = $1,000
Rate (r ) = 7%
Time (n ) = 4 years
Interest earned = $1,000 * 7% * 4
Interest earned = $280
Option C is Correct.
Answer to Question 11.
Simple
Interest:
Amount deposited = $200
Rate (r ) = 8%
Time (n ) = 3 years
Simple Interest = Principal * Rate * Time
Simple Interest = $200 * 8% * 3
Simple Interest = $48
Compound
Interest:
Amount deposited (Principal) = $200
Rate (r ) = 8%
Time (n ) = 3 years
Amount = Principal * (1 + r)^ n
Amount = $200 * (1 + 0.08)^ 3
Amount = $200 * 1.2597
Amount = $251.94
Compound Interest = $251.94 - $200
Compound Interest = $51.94
Interest earned on Interest = Compound Interest – Simple
Interest
Interest earned on Interest = $51.94 - $48
Interest earned on Interest = $3.94
Option A is Correct.
J Approximately what interest rate is needed to double an investment over six years? A) 17...
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