If 12 years later, 888,024 yen has been received for the payment of a receivable amounting to 2,000,000 yen, then how much interest is the investment

We can use following Present Value/ Future value formula to calculate the annual interest rate

PV = FV / (1+R) ^n

Where,

Initial investment or Present Value PV = 888,024 yen

Future value of after 12 years; FV= 2,000,000 yen

Annual interest rate R =? (Assumed annual compounding)

Time period n = 12 years

Therefore,

888,024 = 2,000,000/ (1+R %) ^12

Or (1+R %) ^12 = 2,000,000/ 888,024 = 2.2522

Or (1+R %) = (2.2522) ^ (1/12) = 1.067

Or R = 1.067 – 1 = 0.067 or 6.70%

Therefore annual interest rate on this investment is 6.70%.