Question

In the first year of a 10,000 investment the interest rate was 6%. All earned interest remained invested for the second year, and the interest rate increased to 7%. What was the percent increase of the entire investment after two years?

Answer 1

13.4%

Explanation:

First year:

$10,000*6% = $600

New balance = $10,600

Second Year:

$10,600*7% = $742

$10,600+ $742 = $11,342

Total Return:

Final Balance - Initial balance

$11,342 - $10,000 = $1,342

$10,000*x ÷ $1,342

x = $1,342/$10,000

x = 0.1342

0.134 = 13.4%