The compound interest rate per year that amounts of $1000 one year ago and $1345.60 one year hence are equivalent to is closest to:
(a) 8.5% per year
(b) 10.8% per year
(c) 20.2% per year
(d ) None of the above
Move both cash flows to year 0 and solve for i
1000(1 + i) = 1345.60/(1 + i)
(1 + i)2 = 1345.60/1000
(1 + i) = 1.16
i = 16%
Answer is (d)
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