If a security currently worth $12,800 will be worth $16,843.93 seven years in the future, what is the implied interest rate the investor will earn on the security—assuming that no additional deposits or withdrawals are made?

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AyAyCapitan AyAyCapitan · Answer 1 · 2019-07-04T04:58:33+02:00

Answer:

The implied interest rate will be 4%

Explanation:

We need to check for the annual rate that generate the interest over the next seven years that makes $12,800 become $16,843.93:

[tex]principal * (1 + rate)^{7} = $future value[/tex]

We replace with our know values

12,800 x (1+rate)^7 = 16,843.93

16,843.93 /12,800 = (1+rate)^7

sq7 (16,843.93/12,800) - 1 = rate

And know we find out the unknow value

rate = 0,03999994 = 0.04 = 4%

tallinn tallinn · Answer 2 · 2022-02-23T10:15:16+01:00

First We need to check for the annual rate After that we generate the interest over the next 7 years that makes $12,800 it becomes $16,843.93:

[tex]principal * (1 + rate)7 = future value[/tex]

Then We replace with our know values:

After that 12,800 x (1+rate)^7 = 16,843.93

Then 16,843.93 /12,800 = [tex](1+rate)^7[/tex]

Now sq7 (16,843.93/12,800) - 1 = rate

And also know we find out the unknow value that is

Then rate = 0,03999994 = 0.04 = 4%

Thus, The implied interest rate will be 4%

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