Question

You made an investment of $12,000 into an account that paid you an annual interest rate of 3.5 percent for the first 5 years and 7.9 percent for the next 15 years. What was your annual rate of return over the entire 20 years

Answer 1

interest rate r = 6.78 %

Step-by-step explanation:

given data

investment = $12,000

interest rate = 3.5 percent = 0.035

time = 5 year

interest rate = 7.9 percent = 0.079

time = next 15 year

to find out

What was your annual rate of return over the entire 20 years

solution

we get here interest rate as

interest rate r =
`[(1+r)^(t1) * (1+r)^(t2)]^{(1)/(t1+t2)} - 1` ...................1

here t1 is time period for first 5 year and t2 is time i.e next 15 year and r1 and r2 is rate

now put here value we get

interest rate r =
`[(1+)^(t1) * (1+r)^(t2)]^{(1)/(t1+t2)} - 1`

interest rate r =
`[(1+0.035)^(5) * (1+0.079)^(15)]^{(1)/(5+15)} - 1`

interest rate r = 1.0678 - 1

interest rate r = 0.0678

interest rate r = 6.78 %