54. an investment grows from $100.00 to $150.00 or 50% over five years. what annual increase gives a 50% increase over five years?

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21-12-2022
Business

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54. an investment grows from $100.00 to $150.00 or 50% over five years. what annual increase gives a 50% increase over five years?

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Tom056 Tom056 · Answer 1 · 2022-12-25T08:39:41-05:00

The annual increase which gives a 50% increase over five years is 8.45%.

Given a particular rate of return, present value (PV) is the current value of a future financial asset or stream of cash flows. Applying a discount rate or the interest rate that could be obtained through investing to the future value yields the present value.

We have been given the values, present value, future values and time period.

Present value=$100

Future value=$150

Time=5 years

The formula for the future value is

F=P(1+r/100)^t

where

F=future value

P=present value

r=rate of interest

t=time period.

Substituting the values we get,

150=100(1+r/100)^5

(150/100)^(1/5)=(1+r/100)

(1+r/100)=1.0845

r=(1.0845-1)*100

r=8.45%.

The rate of interest is 8.45%.

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