Question

Attempts: Average be number of years 4. Finding the interes Aa The future value and pre correspond to present and quations also help in finding the interest rate and the number of years that value calculations. If a security currently worth $12,800 will be worth $18,807.40 five years in the future, what is the implied interest rate the investor will earn on the setsrity-assuming that no additional deposits or withdrawals are made? O O 8.00% 0.29% 1.47% 6.40% If an investment of $35,000 is earning an interest rate of 8.00%, compounded annually, then it will take for this investment to reach a value of $44,089.92-assuming that no additional deposits or withdrawals are made during this time. Which of the following statements is true-assuming that no additional deposits or withdrawals are made? O An investment of $50 at an annual rate of 5% will return a higher value in five years than $25 invested at an annual rate of 10% in the same time. An investment of 525 at an annual rate of 10% will return a higher value in five years than $50 invested at an annual rate of 5% in the same time. O

Answer 1

part 1:

a.8.00%.

future value of a single amount = amount invested*(1+ interest rate)^number of years.

=>18,807.40 = 12,800*(1+ interest rate)^5

let interest rate be x

=>18,807.40 = 12,800*(1+x)^5.

=>1.46932813 = (1+x)^5.

=>1.08 = 1+x

=>x=0.08.

=>x=8%.

part 2:

future value = amount invested* (1.08)^n

=>44,089.92 = 35,000* (1.08)^n

=>1.259712=1.08^n.

apply logarithms on both.

=> log (1.259712) => n log (1.08)

=>0.100027127 =n*0.03342376.

=>2.99196478

=>3 years.

part 3:

A .is true.

An investment of $50 at an annual rate of 5% will return a higher value in five years than $25 invested at an annual rate of 10% in the same time.

working

$50 in 5 years at 5%

=>$50*(1.05)^5

=>463.81.

$25 in 5 years at 10%.

=>$25*(1.10)^5

=>$40.26.