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Homework answers / question archive / QUESTION 4 Mustafa's retirement scheme has been planned in such a way that for the present year (year -0), he is investing QR 200,000 (P--200,000) and he will expect of the asset of F-QR+650,000 after 15 years (n=15)
QUESTION 4 Mustafa's retirement scheme has been planned in such a way that for the present year (year -0), he is investing QR 200,000 (P--200,000) and he will expect of the asset of F-QR+650,000 after 15 years (n=15). Assuming no deposits (A) made to his retirement account over that fifteen-year period, what annual rate of return (1) will he make? [HINT: You may use RATE function in MS Excel to calculate the annual rate of return.) 1.896 2.6% 3.5% 4.7%
Answer: 8.175% per annum
Future value = present value*(1+i)^n
650000 = 200000*(1+i)^15
(1+i)^15 = 650000/200000
(1+i)^15 = 3.25
1+i = 1.081746646
i = 0.08175
rate = 8.175% per annum
Rate formula by using excel also confirmed this answer.
