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23 January, 18:09

You are hoping to have $10,000 in your account 7 years from today in order to go on a reindeer expedition in Lapland. If your current balance is $6,000, what APR (compounded monthly) would be required if you are to have $10,000 in your account in 7 years?

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  1. 23 January, 21:32
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    APR = 7.32%

    Explanation:

    The APR is computed as shown below:

    Future value = Present value (1 + r / m) ^nm

    Future value = 10,000

    Present value = 6,000

    n=7

    m=12

    $ 10,000 = $ 6,000 (1 + r / 12) ^12 x 7

    $ 10,000 = $ 6,000 (1 + r / 12) ^84

    ($ 10,000 / $ 6,000) ^ 1 / 84 - 1 = r / 12

    1.006099786 - 1 = r / 12

    0.006099786 x 12 = r

    r=0.006099786 x 12

    r = 7.32%

    APR = 7.32%
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