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IB Mathematical Studies, Financial Mathematics

How can we calculate for what annual rate of interest was paid for an amount of $24,000 to be deposit into an account that compounded quarterly and 2 years later the account totals $29,000?

Thanks

How can we calculate for what annual rate of interest was paid for an amount of $24,000 to be deposit into an account that compounded quarterly and 2 years later the account totals $29,000?

Thanks

- William
**Posts:**0**Joined:**Mon Jan 28, 2013 8:07 pm

IB Mathematical Studies, Financial Mathematics, annual rate of interest

The general compounding formula is:

Where F is the future value of the investment (=$29,000), P the principal (=$24,000), r is the interest rate per compound period (unknown in our case) and n is the number of compounding periods (2*4=8).

Therefore

(using solver or graph) and then multiply this number by 4 and get the interest rate per annum

The guidelines for doing this exercise directly to GDC Casio FX-9860 is

TVM -> F2: Compound Interest -> PV=24000, FV=-29000, P/Y=4, C/Y=4, n=8 and then press I% and get the same result (9.57%).

Hope these help!!

The general compounding formula is:

Where F is the future value of the investment (=$29,000), P the principal (=$24,000), r is the interest rate per compound period (unknown in our case) and n is the number of compounding periods (2*4=8).

Therefore

(using solver or graph) and then multiply this number by 4 and get the interest rate per annum

The guidelines for doing this exercise directly to GDC Casio FX-9860 is

TVM -> F2: Compound Interest -> PV=24000, FV=-29000, P/Y=4, C/Y=4, n=8 and then press I% and get the same result (9.57%).

Hope these help!!

- nicole
**Posts:**0**Joined:**Mon Jan 28, 2013 8:10 pm

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