Answer :
Answer:
Annual Compounding rate is approximately 6.85%
Explanation:
The future value of an ordinary annuity with deposits P made for n years, with interest compounded times once a year at an annual rate i, is given as:
[tex]F.V.=\dfrac{P[(1+i)^n-1]}{i}[/tex]
If Future Value = $5734.70.
Regular Deposit, P=$1000
n=5 years
[tex]5734.70=\dfrac{1000[(1+i)^5-1]}{i}[/tex]
Using Excel:
In put this formula in Cell B2 : =(1000*(1+A2)^5-1000)/A2
We find out that our interest rate, r is between 0.05 and 0.06
Taking Intermediate values, [tex]r\approx 0.0685[/tex]
