Question

At what rate would u need to invest $25000 to earn $5000 in 2 years?

Answer 1

The appropriate interest rate would be 10%.

Explanation:

Without further info I must assume that you want "simple interest" on the $25000 principal. The appropriate formula for simple interest is:

i = p*r*t, where p is the principal amount, r is the interest rate as a decimal fraction, and t is the time in years.

i

We want the rate, r, so we solve this equation for r: r = -------------

p*t

Now we're in a position to substitute the known values of i, p and t and to calculate r from them:

$5000 1

r = ---------- ------------- = --------------- = 0.10

($25000)(2 yrs) 10

The appropriate interest rate would be 10%.