shallom01
Sep 25, 2007, 11:00 AM
how do u find the interest rate when you have a fv 502.84, pv 250 and number of years 5. When the equation fv=pv(1+k)^n, where k is the interest
ake_finance
Oct 1, 2007, 08:07 PM
FV = PV(1+K)^n
I will take ln or natural log in both sides of the equation
ln(FV) = ln(PV) + ln(1+K)^n
ln(FV) = ln(PV) + n*ln(1+K)
then I move n from the left hand side to the right hand side
(ln(FV)-ln(PV))/n = ln(1+K)
 
If you have calculator, you can find the value of (ln(FV)-ln(PV))/n, I will suppose that this term is X,next
 
        X = ln(1+K) 
I take e  (exponential) to eliminate the ln, I will get
    e^X = 1+K
    (e^X) - 1 = K
 
Therefore, I get tha answer that K = (e^X) - 1