Question

Problem 8 - Simple and Compound Interest

At an effective annual rate of interest of 5.3%, the present value of $7425.70 due in t years is $3250. Determine t

Problem 4 - Simple and Compound Interest

How much would you invest today to have $9500 in 8 years if the effective annual rate of interest is 4%?

Problem 8 - Simple and Compound Interest

At an effective annual rate of interest of 5.3%, the present value of $7425.70 due in t years is $3250. Determine t ?

Answer 1

P8)
`t=7.02 years`

P4) Today you have to invest $6941.55

P8) Is the same P8 above

Explanation:

P8) First of all, we can list the knowns
`VP=7425.70`,
`I=3250` and
`i=5.3`%, so we use
`VF=VP+I=7425.70+3250=10675.70` then we use
`t=(ln(VF/VP))/(ln(1+i))=(ln(10675.70/7425.70))/(ln(1+0.053))  =(0.363)/(0.051)=7.02 years`

P4) First of all, we can list the knowns
`VF=9500`,
`t=8` and
`i=4`%, so we use
`VP=(VF)/((1+i)^(t) ) =(9500)/((1+0.04)^(8) ) =6941.55`

P8) Is the same P8 above