Answer to Question #295846 in Finance for GIGIG

Question

A deposit of 400 € will be worth 750 € in 5 years time. The yearly inflation rate is estimated at 1%. The compounded annual interest rate is: " with steps"

a.12.8%

b.18.3%

c.11.6%

d.13.4%

e.15.2%

Answer 1

Solution:

The correct answer is d.13.4%

 

Formula: $PV = \frac{FV}{(1+r)^{n} }$

$400 = \frac{750}{(1+r)^{5} }$

r = 0.13396 = 13.4%

The compounded annual interest rate is 13.4%