Question

Im trying to get i & n & present value as well as interest value. I

Answer 1

Given:

a)

Future value: 8000

Annual interest rate: 10%

Time invested = 7 years.

Compounding frequency = annually

Recall the formula for computing future value with compound interest is

`S=P(1+(r)/(n))^(nt)`

Here Compounding frequency is annually so n=1.

`i\text{ \%=}(r)/(n)\text{ \%}`

Substitute r=10 and n=1, we get

`i\text{ \% =10 \%}`

We get i %=10 %

Substitute S=8000, r=10/100=0.1, t=7 and n=1 in the formula, we get

`8000=P(1+(0.1)/(1))^(1*7)`

`8000=P(1+0.1)^7`

`8000=P*1.949`
`P=(8000)/(1.949)=4104.669`

The present value is $4104.67

The interest = future value - present vlaue

`\text{Interest = 8000-4104.67=}3895.33`

Interest earned = $3895.33