Your grandfather placed $5,000 in a trust fund for you today. 10 years later the fund...
Your grandfather placed $5,000 in a trust fund for you today. 10 years later the fund will be worth $8,000. What is the interest rate earned on this trust fund? (Annual compounding)
Homework Answers
Present value = 5,000
Time = 10 years
Future value = 8000
FV = PV / (1+R)^N
(1+R)^N = 8000 / 5000
(1+R)^N = 1.6
(1+R)^10 = 1.6
1+R = 1.6^(1/10)
1+R = 1.048122
R = 0.048122
Hence, interest rate = 4.8122%
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