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You have an investment account that started with ​$4 comma 000 10 years ago and which now has grown to ​$10 comma 000. a. What annual rate of return have you earned​ (you have made no additional contributions to the​ account)? b. If the investment account earns 16 % per year from now​ on, what will the​ account's value be 10 years from​ now?

Respuesta :

Answer:

a. 9.59%    b. 44,114.35

Explanation:

a. The rate of return can be calculated using Financial Calculator by pressing 10 for N(number of years), -4000 for PV (PV=present value), 0 for PMT (because you didn't get any payments during those 10 years) and 10,000 for FV (FV= future value). You hit CPT button and then press I/Y button to find the rate of return. Without a calculator the formula is:

[tex]{\frac{ending value of an investment}{beginning value of an investment}^{\frac{1}{10} } -1[/tex]

the whole fraction is taken to the power of 1/10

b. You calculate using the formula below:

10000 × (1+ .16)^10

the ^ in the equation above means to the power of 10

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