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Math Help - Interest Problems

  1. #1
    Junior Member VDestinV's Avatar
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    Interest Problems

    I need to use the formula

    PV=A/(1+i)^n

    where:
    PV is the present value
    A is the final amount
    i is the interest per compounding periods
    n is the number of compunding periods

    Now the question is:

    An investment grows from $600 to $1200 in 9 years. If the interest was compounded monthly, what was the annual rate?
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  2. #2
    Bar0n janvdl's Avatar
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    Quote Originally Posted by VDestinV View Post
    I need to use the formula

    PV=A/(1+i)^n

    where:
    PV is the present value
    A is the final amount
    i is the interest per compounding periods
    n is the number of compunding periods

    Now the question is:

    An investment grows from $600 to $1200 in 9 years. If the interest was compounded monthly, what was the annual rate?
    A = P \left( 1 + \frac{i}{100} \right) ^{n}

    1200 = 600 \left( 1 + \frac{i}{100} \right) ^{9 \times 12}

    1200 = 600 \left( 1 + \frac{i}{100} \right) ^{108}

    2 = \left( 1 + \frac{i}{100} \right) ^{108}

    \sqrt[108]{2} = 1 + \frac{i}{100}

    i = 100 \left( \sqrt[108]{2} - 1 \right)

    This gives you the monthly rate.


    12 \times i = 7.73
    That would be the annual rate.
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