SOLUTION: Helen is saving to start a business. If she invests $10,000 in a savings account now, which of the following is the minimum interest rate required to ensure that she has $25,000 in
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Question 1011176: Helen is saving to start a business. If she invests $10,000 in a savings account now, which of the following is the minimum interest rate required to ensure that she has $25,000 in her account in ten years time? Assume interest is compounded on an annual basis.
Select one:
1. 2.5%
2. 6.4%
3. 9.6%
4. 10.2%
You can put this solution on YOUR website! P=Po{1+r}^10
P/Po=2.5
2.5=(1+r)^10
ln both sides
0.916=10ln(1+r)]
no rounding
divide by 10
raise both sides to e power to remove ln,
e^(0.0916)=1+r
r=0.096, or 9.6%
3.
