A deposit of $1300 will be after 3 years $1639

Finance Aug 13, 2020

A deposit of $1300 will be after 3 years $1639. If the interest is compounded annually, what is the annual interest rate: Select one: O a. 8.02% O b. 8.5% O c. 10.25% O d. 6%

Expert Solution

The annual interest rate is computed as shown below:

Future value = Present value x (1 + r)ⁿ

$ 1639 = $ 1300 x (1 + r)³

($ 1639 / $ 1300) ^{1 / 3} - 1 = r

r = 8.02% Approximately

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