- #1

iksotof

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Example

FV = future value

PV = present value

R = interest rate

N = number of compounding periods

my PV is 6000 and my FV is 10000. Compounding periods is 12, I need to find the interest rate, thus...

100000 = 6000 (1 + R) to power of 12 (sorry don't know how to represent that on key board).

substitution: 1.67 = (1 + R) power 12

substitution 2: 12√1.67 = 1 + R

1.0435 - 1 = R

R = 4.45.

All very well, but I lose understanding of how the maths is applied at sub 2, my textbook

has given this model answer. For a novice please show me step by step what

12√1.67 means.

Thanks you Darren.