Question

QUESTION 20

Answer 1

The rate of interest required to achieve the conditions set forth is 7.1773%.

What is the interest rate?

The interest rate is the rate at which the investment increases. The formula that can be used to determine interest rate is:

g = (FV / PV)^(1/N) - 1

Where:

• FV = future value = $32,000
• PV = present value = $8000
• n = number of years

4^(1/20) - 1 = 7.1773%

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