What is the quarterly interest rate that you will need to earn in order for an investment of $1635 to grow to be $1748.73 after 2.25 years?
A) 12.93%
B) 13.93%
C) 10.93%
D) 8.93%
E) 3.00%

Question

Quizplus · Accepted Answer

The formula to calculate the future value of an investment is $FV = PV(1 + r)^n$, where FV is the future value, PV is the present value, r is the interest rate per period, and n is the number of periods. Here, we are given FV = $1748.73, PV = $1635, and n = 2.25 years or 9 quarters (since we're looking for a quarterly rate and there are 4 quarters in a year). Rearranging the formula to solve for r gives us $r = \left(\frac{FV}{PV}\right)^{\frac{1}{n}} - 1$. Plugging in the given values gives us $r = \left(\frac{1748.73}{1635}\right)^{\frac{1}{9}} - 1$, which simplifies to approximately 0.03 or 3% per quarter.

What Is the Quarterly Interest Rate That You Will Need