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What is the interest rate on a three-year investment with a future value of $1000 and a present value of $863.84?
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What is the interest rate on a three-year investment with a future value of $1000 and a present value of $863.84?

User Julien TASSIN
by
8.0k points

1 Answer

6 votes
Use

F=P(1+i)^n

Substituting
F=1000, P=863.84, n=3
solve for i

1000=863.84^(1+i)^3
solving for i
=>

i=((1000)/(863.84))^{(1)/(3)}-1
=0.0500

Answer: the annual interest rate is 5%
User Detly
by
8.8k points
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