Mildred desires to have $7,049 on deposit five years from today. If she has $4,000 to deposit, what rate of interest, compounded annually, must be obtained to accumulate the desired $7,049 in five years? 9% 12% 8% 10%
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
7049=4000*(1+r/100)^5
(7049/4000)^(1/5)=(1+r/100)
(1+r/100)=1.12
r=1.12-1
=12%
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