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You have an investment account that started with $4,000 10 years ago and which now has grown to $12,000
You have an investment account that started with $4,000 10 years ago and which now has grown to $12,000. a. What annual rate of return have you earned (you have made no additional contributions to the account? b. If the investment account earns 15% per year from now on, what will the account's value be 10 years from now? a. What annual rate of return have you earned (you have made no additional contributions to the account)? Your annual rate of return is %. (Round to two decimal places.)
Expert Solution
a )
Future value = $12000
Present value = $4000
n = 10 years
FV = Present value * ( 1 + r )n
12000 = 4000 ( 1 + r )10
r = (Face value / Present value )1 / n - 1
= ( 12000 / 4000 )1/10 - 1
= 1.11612317403 - 1
= 0.1161 or 11.61 %
b )
FV =PV *( 1 +r ) ^ n
= 12000 * ( 1.15 )^10
= $ 48546.69
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