Question

Find the interest rate implied by the following combinations of present and future values: (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required.)

	Present Value Years Future Value Interest Rate $310 12 496 % 138 5 194 % 210 8 210 %

Answer 1

a. Future value = Present value ( 1 + r )ⁿ

$ 496 = $ 310 ( 1 +r )¹²

r = 3.99% Approximately

b. Future value = Present value ( 1 + r )ⁿ

$ 194 = $ 138 ( 1 +r )⁵

r = 7.05% Approximately

c. Future value = Present value ( 1 + r )ⁿ

$ 210 = $ 210 ( 1 +r )⁸

r = 0%

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