The future value and present value equations also help in finding the interest r

Question

The future value and present value equations also help in finding the interest rate and the number of years that correspond to present and future value calculations If a security currently worth $2,000 will be worth $2,631.86 seven years in the future, what is the implied interest rate the investor will eam on the security-assuming that no additional deposits or withdrawals are made? O 4,00% 0 7.60% O 0.19% 0 1.32% If an investment of $45,000 is ea ming an interest rate of 4.00%, compounded annually, then it will take for this investment to reach a value of $64,049.03 assuming that no additional deposits or withdrawals are made during this time. Which of the following statements is true assuming that no additional deposits or withdrawals are made? O It takes 10.50 years for $500 to double if invested at an annual rate of 5% 0 It takes 14.21 years for $500 to double if invested at an annual rate of 5%.

Explanation / Answer

1-

rate

Using rate function in MS excel

rate(nper,pmt,pv,fv,type)

RATE(7,0,-2000,2631.86,0)

4%

2-

time to maturity

Using nper function in MS excel

nper(rate,pmt,pv,fv,type)

NPER(4%,0,-45000,64049.03,0)

9

3-

Answer is 14.21 years

time to maturity

Using nper function in MS excel

nper(rate,pmt,pv,fv,type)

NPER(5%,0,-500,1000,0)

14.21

4-

Discounting

5-

answer is 2

price in today time = future value/(1+r)^n

10000/1.1150^6

5204.162

price in today time = future value/(1+r)^n

10000/1.1725^6

3848.778

6-

an investment that matures in 8 years

price in today time = future value/(1+r)^n

1000/1.068^8

590.7857

price in today time = future value/(1+r)^n

1000/1.068^7

630.9591

7-

answer is 2

1-

rate

Using rate function in MS excel

rate(nper,pmt,pv,fv,type)

RATE(7,0,-2000,2631.86,0)

4%

2-

time to maturity

Using nper function in MS excel

nper(rate,pmt,pv,fv,type)

NPER(4%,0,-45000,64049.03,0)

9

3-

Answer is 14.21 years

time to maturity

Using nper function in MS excel

nper(rate,pmt,pv,fv,type)

NPER(5%,0,-500,1000,0)

14.21

4-

Discounting

5-

answer is 2

price in today time = future value/(1+r)^n

10000/1.1150^6

5204.162

price in today time = future value/(1+r)^n

10000/1.1725^6

3848.778

6-

an investment that matures in 8 years

price in today time = future value/(1+r)^n

1000/1.068^8

590.7857

price in today time = future value/(1+r)^n

1000/1.068^7

630.9591

7-

answer is 2

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