Question

You have $8,960, and you will invest it for 19 years (Hint: this is N). You will need the amount to grow to $54,634 by this time. What rate of return will you need to achieve this?

Answer 1

Current Savings available = $8960

Amount to be grown into $54,634 in 19 years

Calculating the Rate of return required to grow:-

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

where, Future Value = $54,634

Present Value = $8960

r = Periodic Interest rate

n= no of periods = 19

$54,634 = $8960*(1+r)^19

6.09754464285 = (1+r)^19

Taking 19-root on both sides,

1.099826 = (1+r)

r = 9.98%

SO, rate of return will you need to achieve this is $9.98%