Question

Kimberly Willis will invest $33,500 today. She needs $138,709 in 21 years. Click here to view factor tables. What annual interest rate must she earn? (Round answer to 0 decimal places, e.g. 7%.)

Answer 1

To find the annual interest rate required for Kimberly's investment to grow from $33,500 to $138,709 in 21 years, we use the future value formula for compound interest and solve for the rate, remembering to convert it to a percentage and round to no decimal places.

Step-by-step explanation:

To determine the annual interest rate Kimberly Willis must earn to achieve her investment goal of $138,709 in 21 years from an initial investment of $33,500, we can use the future value formula for compound interest:

FV = PV * (1 + r)^n

Where:

• FV is the future value of the investment
• PV is the present value of the investment
• r is the annual interest rate (in decimal form)
• n is the number of years the money is invested

Given that FV = $138,709, PV = $33,500, and n = 21, we need to solve for r. Rearranging the equation yields:

r = ((FV / PV)^(1/n)) - 1

By substituting the given values and solving for r, we are able to find the required rate. Keep in mind to convert the interest rate from decimal to percentage and round it to no decimal places as requested.