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

  1. Mar 18, 2005 #1
    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. jcsd
  3. Mar 18, 2005 #2

    shmoe

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    Science Advisor
    Homework Helper

    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)
     
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