Question

A customer invests 50000. 10 years later, the investment is worth 100000. the customers annual compouned rate of return is?

Answer 1

Answer: The rate of interest is 7.18 %

Step-by-step explanation:

To calculate the rate of interest, we use the equation used for the interest compounded monthly follows:

`A=P(1+(R)/(n))^(nT)`

A = Amount after time period 'T' = $100,000

P = Principal amount = $50,000

R = rate of interest = ?

n = Number of times interest applied per time period = 1 (annually)

T = time period = 10 years

Putting values in above equation, we get:

`100,000=50,000(1+(R)/(1))^(1* 10)\\\\R=0.0718`

Calculating the rate of interest in percentage:

`\Rightarrow R* 100=0.0718* 100=7.18\%`

Hence, the rate of interest is 7.18 %