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1
1.At what annual interest rate, compounded annually, would $520 have to be invested for it to grow to $1,969.32 in 10 years? The annual interest rate, compounded annually, at which $520 must be invested for it to grow to $1,969.32 in 10 years is % (Round to two decimal places.)
2.Much to your surprise, you were selected to appear on the TV show "The Price is Right." As a result of your prowess in identifying how many rolls of toilet paper a typical American family keeps on hand, you win the opportunity to choose one of the following: $1,400 today, $5,000 in 9 years, or $26,000 in 24 years. Assuming that you can earn 15 percent on your money, which should you choose? If you are offered $5,000 in 9 years and you can earn 15 percent on your money, what is the present value of $5,000?
Expert Solution
1.future value of single amount invested = amount invested*(1+r)^n
here,
future value =$1969.32
amount invested =520
r= to be found out.
n=10.
=>1969.32 = 520*(1+r)^10
=>(1+r)^10 = 3.78715384615
=>(1+r)=> (3.78715384615)^(1/10)
=>1+r=1.14243445
=>r=0.14243446
=> rate of interest = 14.24%.
2.PLEASE SEE THE ATTACHED FILE.
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