Interest
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7. How long will it take $400 to grow to $1000 at the following interest rates? A) 4% b) 8% c) 16%
8. A famous Quarterback just signed a $15 million contract providing $3 million a year for 5 years. A less-famous receiver signed a $14 million, 5-year contract providing $4 million now plus $2 million a year for 5 years. Who is better paid, with an interest rate of 10%? How much and why?
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This solution is comprised of a detailed explanation to compute the number of years to grow 400 to 1,000 and find which quarterback got better pay.
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Interest
7. How long will it take $400 to grow to $1000 at the following interest rates? A) 4% b) 8% c) 16%
FV = PV (1+i)n where PV is the present value
FV is the future value
i is the interest rate
n is the period
1,000 = 400(1 + 0.04)n
2.5 = (1.04)n
LN(2.5) = n LN(1.04)
n = LN(2.5)/LN(1.04)
n =
A) 4% n = 23.36
b) 8% n = 11.91
c) ...
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