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PROBLEM 5-3 COMPOUND VALUE SOLVING FOR ANNUAL RATE At what annual rate would the following lump sums have...

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Finance

PROBLEM 5-3
COMPOUNDVALUE SOLVING FOR ANNUAL RATE
At what annual rate would the following lump sums have to beinvested to reach the future values shown?
a. $500 to grow to $1,948.00 in 12 years
b. $300 to grow to $422.10 in 7 years
c. $50 to grow to $280.20 in 20 years
d. $200 to grow to $497.60 in 5 years
SOLUTION
a. $500 to grow to $1,948.00 in 12 years
Invest$500.00
Future value$1,948.00
Number of years12
Annual rate
b. $300 to grow to $422.10 in 7 years
Invest$300.00
Future value$422.10
Number of years7
Annual rate
c. $50 to grow to $280.20 in 20 years
Invest$50.00
Future value$280.20
Number of years20
Annual rate
d. $200 to grow to $497.60 in 5 years
Invest$200.00
Future value$497.60
Number of years5
Annual rate
Requirements:

Answer & Explanation Solved by verified expert
3.9 Ratings (758 Votes)
aInformation providedPresent value 500Future value 1948Time 12 yearsThe interest rate is calculated by entering the below in afinancial calculatorPV 500FV 1948N 12Press the CPT key and IY to compute the interest rateThe value obtained    See Answer
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Transcribed Image Text

PROBLEM 5-3COMPOUNDVALUE SOLVING FOR ANNUAL RATEAt what annual rate would the following lump sums have to beinvested to reach the future values shown?a. $500 to grow to $1,948.00 in 12 yearsb. $300 to grow to $422.10 in 7 yearsc. $50 to grow to $280.20 in 20 yearsd. $200 to grow to $497.60 in 5 yearsSOLUTIONa. $500 to grow to $1,948.00 in 12 yearsInvest$500.00Future value$1,948.00Number of years12Annual rateb. $300 to grow to $422.10 in 7 yearsInvest$300.00Future value$422.10Number of years7Annual ratec. $50 to grow to $280.20 in 20 yearsInvest$50.00Future value$280.20Number of years20Annual rated. $200 to grow to $497.60 in 5 yearsInvest$200.00Future value$497.60Number of years5Annual rateRequirements:

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