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Today, you invest $7,000 in an investment that will pay $14,000in 11 years. What is...

Today, you invest $7,000 in an investment that will pay $14,000 in 11 years. What is the implied rate of interest?

Solutions

Expert Solution

The rate of interest is computed as follows:

= (Amount in 11 years / Today's Investment) 1 / n - 1

= ($ 14,000 / $ 7,000) 1 / 11 - 1

= 2 1 / 11 - 1

= 2 0.09090909 - 1

= 6.50% Approximately

jeff jeffy answered 2 years ago
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