In the first question, interest rate is hidden or we can say we have to find the interest rate.
we have to guess the rate by hit and trial approach, in other words, we have to guess the rate or rates and see if it fits the equation or not.
I've calculated and come to the conclusion that if we take the interest rate 5.756% then we can solve the equation.
here is the equation.,
FV = PV*(1+i)^n
where,
FV = future value which is $7000
PV = present value which is $4000
i = interest rate, which we have to find by guess
and n = time period, which is 10 years
So, the equation will be,
$7000 = $4000*(1+i)^10
so if we put 5.756% as interest rate then we can equate this equation.
FV = $4000*(1+0.05756)^10
= $7000.20 OR $7000
SO, the annual rate of return would be 5.756% or 5.76%.
b answer.
FV = PV*(1+i)^n
FV = 7000*(1+0.017)^10
FV = $33,647.80
So, 10years from now, the account value will be $33,647.80
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