Respuesta :
Using compound interest, it is found that Blake receives an annual rate of 4.27%.
Compound interest:
[tex]A(t) = P\left(1 + \frac{r}{n}\right)^{nt}[/tex]
- A(t) is the amount of money after t years.
- P is the principal(the initial sum of money).
- r is the interest rate(as a decimal value).
- n is the number of times that interest is compounded per year.
- t is the time in years for which the money is invested or borrowed.
Ivan's parameters are given by:
- Put 500 000 ISK, hence [tex]P = 500000[/tex]
- 8 years, hence [tex]t = 8[/tex]
- Quarterly compounding, hence [tex]n = 4[/tex]
- Interest rate of r.
Hence:
[tex]A_i(t) = P\left(1 + \frac{r}{n}\right)^{nt}[/tex]
[tex]A_i(t) = 500000\left(1 + \frac{r}{4}\right)^{32}[/tex]
[tex]A_i(t) = 500000(1 + 0.25r)^{32}[/tex]
Blake's parameters are given by:
- Put 700 000 ISK, hence [tex]P = 700000[/tex]
- 8 years, hence [tex]t = 8[/tex]
- Quarterly compounding, hence [tex]n = 4[/tex]
- Interest rate that is half of Ivan's, hence [tex]\frac{r}{2}[/tex]
Thus:
[tex]A_b(t) = P\left(1 + \frac{r}{n}\right)^{nt}[/tex]
[tex]A_b(t) = 700000(1 + 0.125r)^{32}[/tex]
These amounts are equal, hence:
[tex]A_i(t) = A_b(t)[/tex]
[tex]500000(1 + 0.25r)^{32} = 700000(1 + 0.125r)^{32}[/tex]
[tex]\left(\frac{1 + 0.25r}{1 + 0.125r}\right)^{32} = \frac{700000}{500000}[/tex]
[tex]\left(\frac{1 + 0.25r}{1 + 0.125r}\right)^{32} = \frac{7}{5}[/tex]
[tex]\sqrt[32]{\left(\frac{1 + 0.25r}{1 + 0.125r}\right)^{32}} = \sqrt[32]{\frac{7}{5}}[/tex]
[tex]\frac{1 + 0.25r}{1 + 0.125r} = \left(\frac{7}{5}\right)^{\frac{1}{32}}[/tex]
[tex]\frac{1 + 0.25r}{1 + 0.125r} = 1.01057023172 [/tex]
[tex]1 + 0.25r = 1.01057023172 + 0.12632127896r[/tex]
[tex]0.12367872103r = 0.01057023172 [/tex]
[tex]r = \frac{0.01057023172}{0.12367872103}[/tex]
[tex]r = 0.0854[/tex]
Blake's rate is:
[tex]\frac{r}{2} = \frac{0.0855}{2} = 0.0427[/tex]
Blake receives an annual rate of 4.27%.
A similar problem is given at https://brainly.com/question/24507395
