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MyFinanceLab G My Courses Course Home FIN-250-Q2136-17EW2-Rotier Course Home News Assignments Study Plan Results Pearson e Text Multimedia Library Chapter Resources Homework: 2-3 MyFinanceLab: Assignment: Module Two Homework Save Score: 0 of 1 pt 6 or 10 (6 complete HW Score: 50%, 5 of 10 pts Problem P3-16 (similar to) Question Help * Kirk Van Houten, who has been married for 15 years, would like to buy his wife an expensive diamond ring with a platinum setting on their 30-year wedding anniversary Assume that the cost of the ring will be $37,430 in 15 years. Kirk currently has $4,600 to invest What annual rate of return must Kirk earn on his investment to accumulate enough money to pay for the ring? Click the table icon to view the PVIF table The annual rate of relurn Kirk must earn on his investment is k Round to the nearest rteger ) i Data Table Present Value of $1 (PVIF) 11% 12% 0.935 0.873 0.909 0.826 0.870 0.758 0.658 0.893 0.885 0.877 0.769 0.675 0.862 0.857 0.772 0.693 0.763 0.683 0.659 0.593 0.535 0.681 0.543 0.497 0.666 0.623 0.582 0.544 0.508 0.564 0.376 0.327 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.540 0.467 0.263 0.422 0.352 0.386 0.350 0.322 0.287 0.270 0.237 0.208 0.247 0.397 0.368 0.340 0.288 0.258 0.232 0.444 0.290 0.263 0.239 0.229 0.205 0.388 0.299 0.160 0.252 0.231 0.339 0.292 0.298 0.277 0.258 0.242 0.226 0.153 0.095 0.232 0.070 20 0.064 0.056 0.044 0.053 0.046 0.083 0.080 0.053 0.047 24 25 30 40 50 0.082 0.074 0.044 0.066 0.059 0.033 0.035 0.038 0.020 0.099 0.046 0.075 0.057 0.067 0.034 0.004 0.009 0.005 Print Done Enter your answer in the answer box and then click Check Answwer All parts showing Clear A Check AnswerExplanation / Answer
GIven, future value=37430
n=15
Present value or investment=4600
Presnet Value/Future Value=4600/37430=0.123
From the table we see from column, we search all the rwos till we have found 15..in the row for 15, we find 0.123 lies in column corresponding to 15% interest rate. hence, 15% is the annual return Kirk must earn on his investment to pay for the ring
Alternatively,
Future value=Presnet Value*(1+R)^n
Hence, r=(Future value/present value)^(1/n)-1=(37430/4600)^(1/15)-1=0.14999=14.99%
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