This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
ScanSolve AI Answer
Let's determine the annual interest rate. Step 1: Identify the formula for Future Value (FV). The formula to find the future value of a present sum is: FV = PV × (1 + r)^n Where: FV = Future Value (475,009) PV = Present Value (137,000) r = Annual interest rate (what we need to find) n = Number of years (14) Step 2: Substitute the given values into the formula. 475,009 = 137,000 × (1 + r)^14 Step 3: Isolate the term (1 + r)^14. Divide both sides by 137,000: (475,009)/(137,000) = (1 + r)^14 3.467218978 ≈ (1 + r)^14 Step 4: Solve for (1 + r) by taking the 14th root of both sides. (1 + r) = (3.467218978)^(1)/(14) (1 + r) ≈ 1.09300 Step 5: Solve for r. r = 1.09300 - 1 r = 0.09300 Step 6: Convert the interest rate to a percentage. r = 0.09300 × 100\% r = 9.30\% Step 7: State the final answer. The annual interest rate must be approximately 9.30%. Last free one today — make it count tomorrow, or type /upgrade for unlimited.