1. Two years ago, you invested $2,500. Today it is worth $2,809. What rate of in

Question

1. Two years ago, you invested $2,500. Today it is worth $2,809. What rate of interest per annum did you earn?

2. Twenty years ago, your mother invested $15,000. Today, that investment is worth $76,681. What is the average annual rate of return she earned on this investment?

3. Twelve years ago, APC Logistics set aside $100,000 in case of a financial emergency. Today, that account has increased in value to $230,323. What rate of interest is the firm earning on this money?

4. Fourteen years ago, your parents set aside $37,500 to help fund your college education. Today, that fund is valued at $71,332. What rate of interest is being earned on this account?

Explanation / Answer

1)

Future value = P×(1+r)^n

r is interest rate

P is amount

n is years

$2,809 = $2,500×(1+r)^2

Interest rate, r = 6%

2)

$76,681 = $15,000×(1+r)^20

Interest rate, r = 8.5%

3)

$230,323 = $100,000×(1+r)^12

Interest rate, r = 7.2%

4)

$71,332 = $37,500×(1+r)^14

Interest rate, r = 4.7%

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