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Sagot :
Answer:
12.72%
Explanation:
The relationship between the amount invested today and that of the accumulated value after 15 years is that of a present value($68,000) and future value($410,000 ), hence, using the future value formula below we can determine the annual rate of interest:
FV=PV*(1+r)^n
FV=$410,000
PV=$68,000
r=annual rate of interest =unknown
n=investment time horizon=15 years
$410,000=$68,000*(1+r)^15
$410,000/$68,000=(1+r)^15
$410,000/$68,000 can be rewritten as ($410,000/$68,000)^1
($410,000/$68,000)^1=(1+r)^15
divide the indexes on both sides by 15
($410,000/$68,000)^(1/15)=1+r
r= ($410,000/$68,000)^(1/15)-1
r=12.72%
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