A friend tells you she has saved for 7 years and has a present sum of $10,000, which earned at the rate of 8% per year, compounded quarterly. (a) Deter­mine the equivalent amount she had to start with 7 years ago. (b) Write the EFFECT function to find the effective rate per year.

What will be an ideal response?


(a) P = 10,000(P/F,2%,28)
= 10,000(0.5744)
= $5744

(b) = EFFECT(8%,4) displays 8.243% per year

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