Revision as of 21:18, 29 November 2023 by Admin (Created page with "'''Solution: E''' The equation of value (at the end of year 2) is <math display="block"> 100(1+i)^2+132=230(1+i) . </math> This is a quadratic in <math>i</math> and if we solve it, we get <math>i=.1</math> and <math>i=.2</math>. So the interest rate is either <math>10 \%</math> or <math>20 \%</math>. We cannot eliminate either answer. They are both possible. '''References''' {{cite web |url=https://web2.uwindsor.ca/math/hlynka/392oldtests.html |last=Hlynka |first=M...")
Exercise
Nov 29'23
Answer
Solution: E
The equation of value (at the end of year 2) is
[[math]]
100(1+i)^2+132=230(1+i) .
[[/math]]
This is a quadratic in [math]i[/math] and if we solve it, we get [math]i=.1[/math] and [math]i=.2[/math]. So the interest rate is either [math]10 \%[/math] or [math]20 \%[/math]. We cannot eliminate either answer. They are both possible.
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.