Question

g Ken Francis is offered the possibility of investing $2,745 today; in return, he would receive $10,000 after 15 years. What is the annual rate of interest for this investment?

Answer 1

Answer:

9.00%

Explanation:

If Ken Francis' original investment (P) is $2,745 and the future value (FV), after a period (n) of 15 years, is $10,000, the annual interest rate (r) for this investment is given by:

$FV = P*(1+r)^n\\r=\sqrt[n]{\frac{FV}{P}} -1\\r=\sqrt[15]{\frac{10,000}{2,745}} -1\\r=0.0900 = 9.00\%$

The annual rate of interest for this investment is 9.00%.