7.
You
have
an
investment
account
that
started
with
$3,000
10
years
ago
and
which
now
has
grown
to
$11,000.
a.
What
annual
rate
of
return
have
you
earned
(you
have
made
no
additional
contributions
to
the
account)?
b.
If
the
savings
bond
earns
13%
per
year from
now
on,
what
will
the
account's
value
be
10
years
from
now?
Review
Only
4
Click
the
icon
to
see
the
Worked
Solution
(Formula
Solution).
5
Click
the
icon
to
see
the
Worked
Solution
(Financial
Calculator
and
Spreadshest
Solution).
a.
What
annual
rate
of
return
have
you
earned
(you
have
made
no
additional
contributions
to
the
account)?
Your
annual
rate
of
return
is
13.87
%.
(Round
to
two
decimal
places.)
b.
If
the
savings
bond
earns
13%
per
year from
now
on,
what
will
the
account's
value
be
10
years
from
now?
The
account's
value
in
ten
years
willbe
$
37340.24
.
(Round
to
the
nearest
cent.)
4:
Review
Worked
Solution
(Formula
Solution)
a.
To
determine
the
rate
of
return,
use
the
following
formula:
FV=pPVx(1+n)"
where
PV
is
the
amount
you
invest
today,
FV
is
the
future
value
you
will
receive
in
n,
number
of
years,
and
solve
for
r,
the
annual
rate.
1
FvY"
;
=\
pv
Therefore,
1
_
[$11,ooo
10
4
=
=
o
$3,000
]
1=0.1387=13.87%
b.
To
calculate
the
amount
in
your
account
ten
years
later,
use
the
following
formula:
FV=PVx(1+n)"
Therefore,
FV=$11,000x(1+
0.13)10
=$37,340.24
5:
Review
Worked
Solution
(Financial
Calculator
and
Spreadsheet
Solution)
The
annual
rate
of
return
you
have
eamed
is
computed
as
follows:
N
Y
PV
PMT
FV
Given:
10

3,000
0
11,000
Solve
for:
0.1387
Excel
Formula:
=
RATE(NPER,PMT,PV,FV,0,GUESS)=RATE(10,0,

3000,11000,0,0.1)=
0.1387
b.
If
the
savings
bond
earns
13%
per
year from
now
on,
the
account's
value
10
years
from
now
is
computed
as:
N
Y
PV
PMT
FV
Given:
10
13
11,000
0
Solve
for:
37,340.24
Excel
Formula:
=FV(RATE,NPER,PMT,PV)=FV(0.13,10,0,11000)=
37,340.24
8.
You
are
thinking
of
purchasing
a
house.
The
house
costs
$400,000.
You
have
$57,000
in
cash
that
you can use
as
a
down
payment
on
the
house,
but
you
need
to
borrow
the
rest
of
the
purchase
price.
The
bank
is
offering
a
30year
mortgage
that
requires
annual
payments
and
has
an
interest
rate
of
9%
per
year.
What
will
be
your
annual
payment
if
you
sign
this
mortgage?
Review
Only
Click
the
icon
to
see
the
Worked
Solution
(Formula
Solution).
Click
the
icon
to
see
the
Worked
Solution
(Financial
Calculator
and
Spreadsheet
Solution).
The
annual
payment
is
$
33386
.
(Round
to
the
nearest
dollar.)