This exercise is designed to be solved using technology such as calculators or computer spreadsheets.

A news article published in 2004 said that a country's House of Representatives passed a bill to distribute funds to members of a tribe. Here is an excerpt from that article:

The Claims Commission decided the tribe lost much of their land to gradual encroachment. The tribe was awarded $25 million in 1977. That has grown to about $160 million through compound interest, but the tribe never took the money.

**Assume monthly compounding and determine the APR that would give this growth in the award over the 27 years from 1977 to 2004. Note: This can also be solved without technology, using algebra. (Round your answer to two decimal places.)**

Guest Apr 10, 2018

#1**+1 **

Here is a simple solution:

$160 / $25 =6.4 - growth in the original amount over 27 years

6.4^(1/27*12) =6.4^(1/324) =1.005745758.. - 1 x 1200 =**6.89% comp. monthly over 27 years.**

Using Algebra:

FV = PV x [ 1 + R]^324

160 =25 x [1 + R]^324 divide both sides by 25

6.4 = [1 + R]^324 take the log of both sides

Log[1 + R] = 0.00248820....

[1 + R] = 10^0.00248820

[1 + R] =1.005745758

R =1.005745758 - 1 x 12 x 100

**R =6.89% - compounded monthly.**

Guest Apr 10, 2018