If 100 at time zero will be worth 110 a year later and was w

If $100 at time zero will be worth 110 a year later and was worth 90 a year before, calculate the interest rate for the past year and the interest rate for the next year. (Show work and equations)

Solution

Interest rate = [Value at time N - Value at time (N - 1)] / Value at time (N - 1) x 100

Interest rate for next year = $(110 - 100) / $100 x 100 = 10%

Interest rate for past year = $(100 - 90) / $90 x 100 = 11.11%