Question

An investment of Kshs. 100,000 in an account accumulated to Kshs. 250,000 after 4 years. i)...

An investment of Kshs. 100,000 in an account accumulated to Kshs. 250,000 after 4 years. i) State the accumulation factor A(0,4) [1Mk] ii) Find the simple annual interest rate which would give the accumulation factor in part (i) [2Mks]

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Answer #1

Investment = Kshs 100,000

Future value = Kshs 250,000

Time = 4 years

The accumulation factor can be determined as follows

Accumulation factor, (1+i)^4 = 250,000/100,000 = 2.5

Accumulation factor = 2.5

Now, calculating the interest rate

Interest rate = 25.74% per year.

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