Homework Help: Maria get $50 on 16th bd and$70 on 17th bd HELP

1. Mar 18, 2005

aisha

Maria received $50 on her 16th birthday, and$70 on her 17th birthday, both of which she immediately invested in the bank with interest compounded annually. On her 18th Birthday, she had 134.97 in her account. Draw a time line and calculate the annual interet rate.

How would you draw a time line for this problem?

$50__________$70______________FV
16th_________17th_____________
................................................50(1+i)^16
...........................70(1+i)^17

How do u calculate the annual interest rate?

2. Mar 18, 2005

shmoe

Why are you raising those values to the power 16 and 17? Interest is annual and her 16th birthday money gets 2 years of interest, the 17 year money gets one year.

Find the future values of her 50 and 70 when she's 18. This expression will have some (1+i) terms in it. Equate it to the 134.97 amount and solve for i. You'll need to solve a quadratic (like the rrsp question)