Question

If a security of $10,000 will be worth $15,036.30 seven years in the future, assuming that no additional deposits or withdrawals are made, what is the implied interest rate the investor will earn on the security

Answer 1

6%

Step-by-step explanation:

Implied interest rate = (Future value / present value)^(1/n) - 1

n = number of years

($15,036.30 / $10,000) ^(1/7) - 1

1.503630^(1/7) - 1

= 1.06 - 1 = 0.06 = 6%