George Robinson has $3,000 to invest

Finance Oct 21, 2020

George Robinson has $3,000 to invest. His brother approached him with an investment opportunity that could double his money in 4 years. What interest rate would the investment have to yield in order for George's brother to deliver on his promise?

Expert Solution

We can calculate the interest rate by using the following formula in excel:-

=rate(nper,pmt,-pv,fv)

Here,

Rate = Interest rate

Nper = 4 periods

Pmt = 0

PV = $3,000

FV = $3,000*2 = $6,000

Substituting the values in formula:

= rate(4,0,-3000,6000)

= 18.92%

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