SOLUTION: How can one invest $800.00 for 25 years and receive a $15,000.00 return? If $800.00 is invested for 25 years and the return is $15,000.00 what are the interest rates?

Question 492061: How can one invest $800.00 for 25 years and receive a $15,000.00 return?
If $800.00 is invested for 25 years and the return is $15,000.00 what are the interest rates?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
if you invest $800.00 per year for 25 years, then you will have 25 * $800.00 = $20,000 at the end of the 25th year with 0% interest.

in other words, if you only expect to have $15,000 at the end of the 25 years, you need to earn a negative interest.

this is not ordinarily done.

if you divide $15,000 by $800, then you will get 18.75 years.

if you pick a number of years less than 18.75, you will wind up with a positive interest rate being required.

we will assume you invest $800.00 at the end of each year.

if you do that for 18.75 years and you expect $15,000 at the end of it, then the interest rate required each year is equal to 0%.

if you want to have $15,000 at the end of 18 years, then the interest rate required is 0.48%

if you want to have $15,000 at the end of 15 years, then the interest rate required is 3.11%

if you ant to have $15,000 t the end of 10 years, then the interest rate required is 13.37%.

if you invest $800.00 at the end of each year for 25 years, and the interest rate you earn on your money is 5% per year compounded annually, then you will have $38,181.68 at the end of the 25 years.

this assumes that you re-invest the interest each year at the same rate of interest.

if you invest $800.00 at the end of each year for 25 years, and the interest rate you earn on your money is 2% per year compounded annually,then you will have $25,624.24 at the end of the 25 years.

if you only want $15,000 at the end of 25 years, and you earn at 2% interest per year, then you only need to invest $468.31 per year for 25 years.

here's an online calculator that you can use to play with the numbers.

http://buyupside.com/calculators/recurringinvestmentcalculatordec07.htm

you select the investment frequency (i selected annual).
you enter the investment amount (i entered $800.00)
you select the annual rate of return (i entered 2% per year).
this is the annual rate of return that you expect from your investment.
you enter the number of years (i entered 25).
you select "calculate" and it tells you how much money you'll have at the end of the investment period.

it doesn't tell you the interest rate.
you have to tell it.

you can, however, play with the interest rate until you get the future value that you want.

in your problem, in order to get $15,000 future value, i had to enter an interest rate of -2.5% per year.

if you could enter 0%, you would get a future value of $20,000.

since you can't, then enter something very small, like .00001 and it will give you an answer.

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