Respuesta :
Answer:
Ans. the annual rate of return, in order to turn $5,000 into $24,000 in 15 years is 11.02% annual.
Step-by-step explanation:
Hi, well, in order to find the value of the interest rate of return, we need to solve for "r" the following equation,
[tex]Future Value=PresentValue(1+r)^{n}[/tex]
Where:
n= years (time that the money was invested)
r=annual rate of return (Decimal)
So, let´s see the math of this.
[tex]24,000=5,000(1+r)^{15}[/tex]
[tex]\frac{24,000}{5,000} =(1+r)^{15}[/tex]
[tex]\sqrt[15]{\frac{24,000}{5,000} } =1+r[/tex]
[tex]\sqrt[15]{\frac{24,000}{5,000} } -1=r[/tex]
[tex]r=0.11023[/tex]
So the annual rate of return that turns $5,000 into $24,000 in 15 years is 11.02%.
N=15; PV=5,000; FV=24,000; PMT=N.A; I/Y=11.02% P/Y=N.A
Best of Luck.
