Answer to Question #134236 in Finance for Khalid

Question #134236
sarah transported 12,500$ in a bank 4 years back. she earned today a total amount of 15,500$ what was the rate of interest charged for her investmeny
1
Expert's answer
2020-09-21T08:57:26-0400

solution


Initial investment, P=12,500Initial\ investment, \ P=12,500

Final value, C=15,500Final\ value, \ C=15,500

Duration, n=4 yearsDuration, \ n=4\ years


Let the interest rate =r=r


Assuming her initial investment is compounded annually;



C=P (1+r)nC= P \ (1+r)^n15,500=12,500 (1+r)415,500 = 12,500 \ (1+r)^41.24=(1+r)41.24= (1+r)^4ln (1.24)=4 ln (1+r)ln\ (1.24)= 4\ ln\ (1+r)0.0538=ln (1+r)0.0538= ln\ (1+r)e0.0538=1+re^{0.0538}= 1+r1.055251=0.05525=r1.05525 -1= 0 .05525=r

answer: the rate of return on her investment is 5.525%5.525\%


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