Rework number 4-use quarterly compounding. Show work.

4. calculating interest rates (rates of return) We can do more than simply figure dollar amounts in the present or in the future. In addition, we can figure what interest rate or amount of time it will take to get from one (PV) to the other (FV). In this exercise, we are taking the sum today (PV) and the sum in the future (FV) as well as the length of time (N) as given. Then we calculate the interest rate necessary to turn the PV into the FV, or vice versa. NOTE that interest rates must always be stated in annual terms. So, depending upon the compounding, an adjustment may need to be made to get to annual terms. First, assume annual compounding. PV =-715; FV = 1381; N =9; CPT V/Y = 7.59 PV = -905; FV = 1718; N = 12; CPT V/Y = 5.48 PV = -15000; FV = 141832; N = 26; CPT V/Y = 9.03 PV = -70300; FV = 312815; N = 15; CPT V/Y = 10.46 Since the examples above assumed annual compounding, no adjustment was necessary to state the rate in annual terms. Now, let's rework the examples using semi-annual compounding. Now, the result is not a rate per year, but a rate per 1/2 year. To adjust for annual terms, the result must be doubled. semi-annual compounding PV =-715; FV = 1381; N = 18; CPT V/Y = 3.72 semiannual Annual rate = (3.72)(2) = 7.44 PV = -905; FV = 1718; N = 24; CPT I/Y = 2.71 semiannual Annual rate = (2.71)(2) = 5.42 PV = -15000; FV = 141832; N = 52; CPT I/Y = 4.42 semiannual Annual rate = (4.42)(2) = 8.84 PV = -70300; FV = 312815; N = 30; CPT I/Y = 5.10 semiannual Annual rate = (5.10)(2) = 10.20