You are 25 years old and inherit $65,000 from your grandmother. If you wish to purchase...

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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

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Answer 1

Answer #1

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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Answer 2

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