Question

The cash-flow diagram is provided. a. If P $2,000, A $250, and % 9% peryear, then N ? b. If P $2,000, A $250, and N 8 years, then / = ? c. If A $250, % =9% per year, and N 4 years, then P=? d. If P $2,000, /% = 9% per year, and N 4 years, then A = ?

Answer 1

A. P = $ 2,000, A = $ 250, I= 9% per year

Take log on both sides

B. P = $ 2,000, A = $ 250, N = 8

Let us assume i = 3%

The actual value is 8 thus the rate must be less than 3%. Let us assume rate = 2%

The interest rate is

Interest rate = 2.43 %

C. A = $ 250, i= 9%, N =4 years

D. P = $ 2,000, i = 9%, N = 4 years

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