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The future value and present value equations also help in finding the interest rate and the number of years that correspond to present and future value calculations. If a security currently worth $12,800 will be worth $16,843.93 seven years in the future, what is the implied interest rate the investor will earn on the security—assuming that no additional deposits or withdrawals are made? 4.00% 0.19% 3.20% 7.60%

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estebancgo

Answer:

i=4%

Explanation:

this problem is possible to solve applying the principle of future value, keep in mind the next formula:

[tex]FV=PV*(1+i)^{n}[/tex]

where FV is future value, PV is the present value, i is the periodic interest rate and n is the number of periods. So applying to this particular problem we have:

[tex]16,843.93=12,800*(1+i)^{7}[/tex]

the difference here is that we must solve n so we can do:

[tex](\frac{16,843.93}{12,800})^{1/7}-1=i[/tex]

so i=4%