Homework Help: Finance

Posted by Antoinette on Sunday, March 18, 2007 at 11:45pm.

Calculating Interest Rate. Find the interest rate implied by the following combinations of present and future values.

PresentValue Years Future Value
$400 11 $684
$183 4 $249
$300 7 $300

Since you do not state otherwise, I am assuming that your interest rate is compounded annually.
I will do the second of your questions.

Using Amount = Present Value(1+i)^n
we do not know i.

249=183(1+i)^4
1.3606557=(1+i)^4
take the fourth root
1.0800331=1+i
giving you i=0.0080031
so the annual rate is 8%

by observation the rate for you last question is clearly 0%

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