Question

In: Finance

Your grandparents deposited $12,000 into an account for you 17 years ago for college expenses. The...

Your grandparents deposited $12,000 into an account for you 17 years ago for college expenses. The account balance grew to $24,000. What rate of return (in percentage) was their deposit earning, annually?

Solutions

Expert Solution

future value of deposit = amount deposited *(1+ rate of return)^n

here,

future value of deposit = $24,000

amount deposited = $12,000

rate of return = r = to be found out.

n =17.

=>24,000 = 17,000*(1+r)^17

=>1.41176470588 = (1+r)^17

=> (1.41176470588)^(1/17) =>1+r

=>1.02049187=1+r

=>0.02049187 =r

=>2.05%.


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