Question

Rick deposited $3,100 into an account 13 years ago for an emergency fund. Today, that account is worth $5,280. What annual rate of return did Rick earn on this account assuming no other deposits and no withdrawals?

Answer 1

4.18%

Step-by-step explanation:

The formula for used for this calculation is given as

Future value = Present( Initial) value (1 + r)ⁿ

Where n = number of years of the investment = 13 years

Future value (Amount of the investment after 13 years)= $5,280

Present ( Initial) value (Amount of the investment before 13 years) = $3,100

r = rate of return

The formula for r is derived as:

r = (Future value/ Present (initial) value)¹/ⁿ- 1

r = ($5,280/$3,100)¹/¹³ - 1

r = 1.0418139573 - 1

r = 0.0418139573

r is always in percentage format

r = 0.0418139573 × 100

r= 4.18139573%

Approximately, the rate of return annually for 13 years = 4.18%