You have an investment account that started with $4,000 10 years ago and which now has grown to $10,000. a. What annual rate of return have you earned (you have made no additional contribution to the account)? b. If the savings bond earns 14% per year from now on, what will the account's value be 10 years from now?
You have an investment account that started with $4,000 10 years ago and which now has grown to $10,000. a. What annual rate of return have you earned (you have made no additional contribution to the account)? b. If the savings bond earns 14% per year from now on, what will the account's value be 10 years from now?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Step 1
A.) We are given
Amount invested (Present value) =4000
No. of period(Nper)=10years
Amount grown to be (Future value) =10000
We have to find the rate of return on this investment. We will use RATE function in excel to calculate the value. Just simply type =RATE in any cell in excel to start this function.
Formula:
=RATE(Nper,pmt,pv,fv)
Nper=10 , pmt=0 (not given) , pv =4000, fv=10000
=RATE(10,0,-4000,10000)
(always use negative sign in front of pv value to get positive answer)
=9.59582%
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