E6-10 (Unknown Periods and Unknown Interest Rate) Consider the following independent situations.
(a) Mike Finley wishes to become a millionaire. His money market fund has a balance of $92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000?
(b) Assume that Serena Williams desires to accumulate $1 million in 15 years using her money market fund balance of $182,696. At what interest rate must Serena's investment compound annually?© BrainMass Inc. brainmass.com June 3, 2020, 8:46 pm ad1c9bdddf
(a) The number of interest periods is calculated by first dividing the future value of $1,000,000 by $92,296, which is 10.83471 - the value $1.00 would accumulate to at 10% for the unknown number of interest periods. The factor ...
The solution explains how to calculate the time period and the interest rate so as to get a desired future value given the present amount.