Question

Please show your work with the formulas written out. Please answer as if you can only use a four function calculator (because that is how I have to learn it). Do not just put down the calculator keystrokes I need to see every step and number to learn how to do it.

9. If you paid $750 for an investment 25 years ago that is now worth $2000, what was your rate of return?

10. If you save $100 per month, what annual rate of interest must you earn in order to accumulate $10,000 after 10 years?

11. If you borrow $250,000 for 10 years and your monthly payment is $1000, what rate of interest are you paying?

12. If you bought a bond five years ago for $900 which paid annual interest of $250 and sold it today for $950, what was your rate of return?

Answer 1

9.

r = (2,000/750)^1/20 - 1 = 5.03%

10.

Calculating r,

Using TVM Calculation,

I = [PV = 0, FV = 10,000, PMT = 100, N = 120]

I = 3.79%

11.

Calculating r,

I = [PV = 250,000, FV = 0, PMT = -1,000, N = 120]

I = 13.08%

12.

Calculating r,

I = [PV = -900, PMT = 250, FV = 950, N = 5]

I = 28.41%