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Morgan has an investment worth $130,000 dollars after 20 years. If his original investment was for $50,000 what must the interest rate have been?.

Sagot :

ayune

Morgan's initial investment was $50,000. After 20 years, it becomes $130,000. The interest rate is 4.9%

Assuming the compound interest, the formula for the future value is:

FV = PV (1 + r)ⁿ

Where:

PV = present value

r = interest rate

n = number of periods

Parameters given in the problem:

FV = $130,000

PV =  $50,000

n = 20

Plug these parameters into the problem:

130,000 = 50,000 (1 + r)²⁰

(1 + r)²⁰ = 2.6

1 + r = 1.049

r = 1.049 - 1 = 0.049 = 4.9%

Learn more about interest here:

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