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Math Help - Solving for interesting rate in PV formula

  1. #1
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    Solving for interesting rate in PV formula

    So, I know that to find the present value factor for IRR is

    1/(1+i)^t

    We than take the resulting number and compare it to a chart, but how do figure the interest rate if it isn't a whole number. Say we know the PV factor and not the interest rate? What is the formula? Do we use log?
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  2. #2
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    Logarithms often are useful. However, if you've more than four payments, you have no expectation of solving. You may luck out, but it would be only luck.

    Why would integer or non-integer make any difference? You cannot show one real example where interest rates are restricted to integer values. There are some with values rounded to integer in the end.

    If your table has only integer values, you must learn to interpolate other values between them. There are many ways to do this. Linear is often sufficient.

    "Interesting Rate"?
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  3. #3
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    IF you're talking about a lump-sum, then:
    P = F / (1 + i)^n ; P = Present value, F = Future value

    To solve for i:
    (1 + i)^n = F/P
    i = (F/P)^(1/n) - 1
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