What interest rate is one earning over ten years if the investment initially is 100$ and you receive 20$ back at the end of ten years?

What interest rate is one earning over ten years if the investment initially is 100$ and you receive 20$ back at the end of ten years?
A.6
B.8
C.7.2
D.9.5

Solutions

Expert Solution

Note $20 is taken as $200, as it is Logical.

Future Value = Present Value * (1+r)^n

n = 10 years

200 = 100 * (1+r)^10

(1+r)^10 = 200 / 100

(1+r)^10 = 2

1+r = 2^(1/10)

r = 1.07177346254 -1

r = 7.20%

Option C is correct.

jeff jeffy answered 2 years ago

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