If $11,000 had been invested in a certain investment fund on September 30, 2008, it would...
If $11,000 had been invested in a certain investment fund on September 30, 2008, it would have been worth $52,201.12 on September 30, 2018. What interest rate, compounded annually, did this investment earn? (Round your answer to two decimal places.)
Homework Answers
It is assumed that Rate is R and life of investment is n.
Accordingly
Amount invested * (1+R)n = sum today
$11000 * (1+R)10= $52201.12
(1+R)10 = 4.7455
By trial and error , we conclude that
R = 16.85% (Approx)
Note for calculating through trial and error we will assume different rate for example 14% or 18% and try to come as close to 4.7455
Alternatively we can see present value factor table and find that rate at which the factor is 4.7455.
Feel free to ask any queries..
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