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View Full Version : How do you calculate interest rates ?


braiduizum
Feb 11, 2008, 08:21 AM
How do I find out the interest rate of a problem if the present value is @265 the durations of time is two years and the future value is $307.

braiduizum
Feb 11, 2008, 08:25 AM
How do I slove for the interest rate when the present value is $265 the number of years is two and the future value is $307.

braiduizum
Feb 11, 2008, 08:31 AM
FV = PV(1+r)t-1

(307/265)2-1=10%

morgaine300
Feb 11, 2008, 11:47 PM
Not sure where you got that equation.

The problem doesn't mention compounding which tells me it's simple interest, which is:

FV = PV (1 + rt)

If it were compounded, it would first have to say how often it compounds. If we assume it compounds annually, it would be:

307 = 265 (1 + r) ^ 2

meaning you're getting into solving for things using radicals and the answer would still not be too far off from using the simple interest equation. (i.e. it's not 10% either way)

Try the simple interest equation and see what you come up with.