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Solution: What are the conditions on the rate of interest, i% per year compounded annually?

(Last Updated On: December 8, 2017)

What are the conditions on the rate of interest, i% per year compounded annually?

Problem Statement: ME Board April 1996

Consider a deposit of P600.00 to be paid back in one year by P700.00. What are the conditions on the rate of interest, i% per year compounded annually such that the net present worth of the investment is positive? Assume i is greater than or equal to 0.

  • A. 0 ≤ i < 14.3%
  • B. 0 ≤ i <16.7%
  • C. 12.5% ≤ i <14.3%
  • D. 16.7% ≤ i <100%

Problem Answer:

The conditions on the rate of interest is 0 ≤ i <16.7%.

Solution:

Solution: What are the conditions on the rate of interest, i% per year compounded annually?

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