Answer to Question #219185 in Financial Math for Tina

Question

An amount of R20 000 is invested in shares on the stock market and after eight years, the shares are sold for R52 000. Calculate the compound interest rate that will provide the same return.

Answer 1

$A=P(1+I)^n$

$52000=20000(1+i)^8$

$\frac{52000}{20000}=\frac{20000}{20000}(1+i)^8$

$\frac{52000}{20000}=(1+i)^8$

$\sqrt[8]\frac{52000}{20000}=\sqrt[8]{(1+i)^8}$

$\sqrt[8]\frac{52000}{20000}=1+i$

$\sqrt[8]\frac{52000}{20000}-1=i$

$i=0.1269=12.69\%$