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Sagot :
Answer:
7.95%
Explanation:
the first step is to determine the present value of the 10 year annuity
[tex]1000\frac{(1 + 0.08)(1 - (1 - 0.08)^{-10} }{0.08}[/tex] = 7246.89
remaining balance of the 10,000 is invested in a 10-year certificates of deposit = 10,000 - 7246.89 = $2753.11
We would calculate the future value of this amount
The formula for calculating future value:
FV = P (1 + r/m)^mn
FV = Future value
P = Present value
R = interest rate
N = number of years
m = number of compounding
$2753.11 x ( 1 + 0.09/4)^(4 x 10) = 6704.34
calculate the value of reinvestments
[tex]1000\frac{(1 + 0.07) ( 1 + 0.07)^{10} - 1 }{0.07}[/tex] = 14783.60
14783.60 + 6704.34 = 10,000 ( 1 + er)^10
er = 0.0795 = 7.95%
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