Calculate the annual rate of interest you are earning?
2007-09-09 16:03:50 · 3 answers · asked by SAIF R 1 in Business & Finance ➔ Investing
I don't get the drift of your question? $200 interest isn't much. I'd expect more than that.
2007-09-09 16:08:56 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Invest $1000 today and in three years have $1200
Determine the annual interest rate.
After the first year you will have (1+x)*1000
where x is the fractional annual interest rate.
After 3 years we can write
1200 = (1+x)(1+x)(1+x) * 1000
1200 = 1000 * (1+x)^3
In general
FV = PV * (1 + Int) ^ N
FV = Future value
PV = Present value
Int = fractional interest rate per year
N = number of years
Solve for interest rate
1200 = 1000*(1 + x)^3
1200/1000 = (1 + x)^3
(1200/100)^(1/3) = 1 + x
x = 1 - (1200/1000)^(1/3)
x = 1 - 1.0626579
x = 0.0626579
Therefore the annual interest rate is
6.26579%
In general
APIR = 100 * (1 - FV/PV)^(1/N)
2007-09-09 23:57:27 · answer #2 · answered by trader 4 · 2⤊ 0⤋
Less than 7% , but it's not my homework , so I'm not being too detailed .
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2007-09-09 23:08:27 · answer #3 · answered by kate 7 · 0⤊ 0⤋