You are 25 years old and inherit $65,000 from your grandmother. If you wish to purchase...
You are 25 years old and inherit $65,000 from your grandmother. If you wish to purchase a $100,000 boat to celebrate your 30th birthday, what compound annual rate of return must you earn?
PLEASE PROVIDE WHAT YOU WOULD PLUG INTO A FINANCIAL CALCULATOR AND SOLVE FOR! I don't need the formulas
Homework Answers
The problem can be solved on a financial calculator (Teas BA II Plus) as described below:
- Input PV = - $ 65000 (Present Value is considered input and hence carries a negative sign)
- N = 5 ( as time in years between 25 and 30 is 5)
- PMT = 0 (as there are no periodic cash flows between 25 and 30 years)
- FV = $ 100000
- CMPT - > I / Y
The above steps when followed would give the annual rate of return as 8.997 %
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