Suppose your uncle invested $121,000 in an investment 4 years ago. The investment is worth now...

Suppose your uncle invested $121,000 in an investment 4 years ago. The investment is worth now $237,500. The annual interest rate (rate of return) on the investment during this period must be ______% per year.

(Do not include the percent signs (%). Round
your answers to 2 decimal places. (e.g., 32.16))

Solutions

Expert Solution

Given, value of investment 4 years agao= 121000

value of investment today=237500

value of investment today is given as = value of investment 4 years ago*(1+interest rate) ^time

237500=121000*(1+interest rate)^4

237500/121000=(1+interest rate) ^4

(237500/121000)^(1/4)=1+interest rate

Interest rate =(237500/121000)^(1/4)-1

Interest rate =1.1836398-1=18.36398% or 18.36%

Hence the annual rate of interest must be 18.36% per year

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

10 years ago you invested $1,000. If your investment is worth $6,000 now, what was your rate of return?

10 years ago you invested $1,000. If your investment is worth $6,000 now, what was your rate of return?Multiple Choicea. 17.46% +/- 1.00%b. 10.74% +/- 1.00%c. 13.12% +/- 1.00%d. 19.62% +/- 1.00%

64. Five years ago, Brian had invested $14,850 in a growth fund. The investment is worth...

64. Five years ago, Brian had invested $14,850 in a growth fund. The investment is worth $22,000 today. If the interest was compounded annually, what is the annual rate of return earned on the investment? 7.25% 8.18% 9.52% 10.75% 11.66% 66. Bill is considering investing $450 at the end of every month in a fixed income instrument. He will be receiving $27,000 at the end of 4 years. If the interest is compounded monthly, what...

An investment was worth $38 two years ago, $52 one year ago, and is worth $46...

An investment was worth $38 two years ago, $52 one year ago, and is worth $46 today. The holding period return for the most recent year only (from 1 year ago to today) is _______%. If your answer is negative, be sure to include a negative sign preceding your answer (ex. -.045678 or -4.5678% should be entered as: -4.57). A(n) 3.3% bond with 6 years left to maturity has a YTM of 5.5%. The bond's price should be $__________. You should...

4 years ago , Paul invested $1500. Three years ago, Trek invested $1600. Today, these two...

4 years ago , Paul invested $1500. Three years ago, Trek invested $1600. Today, these two investments are each worth $1800. Assume each account continues to earn its respective rate of return. (1) What is annual interest rate that Saul earned? (2) What is annual interest rate that Trek earned？ (3) Was Trek’s investment worth less than Saul one year ago?

one year ago you invested $5000. today your investment is worth $6178.40. What rate of interest...

one year ago you invested $5000. today your investment is worth $6178.40. What rate of interest did you earn?

Your uncle calls and asks for your investment advice. Currently, he has $100,000 invested in a...

Your uncle calls and asks for your investment advice. Currently, he has $100,000 invested in a risky portfolio. This portfolio has an expected return of 10.5% and a volatility of 8%. Suppose the risk-free rate is 5% and the market portfolio has an expected return of 18.5% and a volatility of 13%. To maximize your uncle’s expected return without increasing his volatility, what investment strategy would you recommend? If your uncle prefers to keep his expected return the same, but...

Your uncle has 431,000 invested at 6.8% and he now wants to retire. He plans to...

Your uncle has 431,000 invested at 6.8% and he now wants to retire. He plans to withdraw $40,000 at the end of each year, beginning this year. How many years will it take to exhaust his funds, i.e., run the account down to zero?

Your uncle has $320,000 invested at 7.5%, and he now wants to retire. He wants...

Your uncle has $320,000 invested at 7.5%, and he now wants to retire. He wants to withdraw $35,000 at the end of each year, starting at the end of this year. He also wants to have $25,000 left to give you when he ceases to withdraw funds from the account. For how many years can he make the $35,000 withdrawals and still have $25,000 left in the end? a. 12 years b. 16 years c. 15 years d. 17...

1) Your uncle has $300,000 invested at 7.5%, per annum and he now wants to retire....

1) Your uncle has $300,000 invested at 7.5%, per annum and he now wants to retire. He wants to withdraw $35,000 at the beginning of each year, starting immediately. He also wants to have $25,000 left to give Katya when he ceases to withdraw funds from the account. For how many years can he make the $35,000 withdrawals and still have $25,000 left in the end? a. 15 b. 13.5 c. 13.5 d.11.9 2. Which statements is TRUE? a, firms...

Ten years ago, you invested $2,000. Today it is worth $5,000. What rate of interest did...

Ten years ago, you invested $2,000. Today it is worth $5,000. What rate of interest did you earn? A. 9.60 percent B. 9.97 percent C. 9.03 percent D. 9.18 percent

Subjects