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Rick deposited $2,600 into an account 8 years ago for an emergency fund. Today, that account...

Rick deposited $2,600 into an account 8 years ago for an emergency fund. Today, that account is worth $4,025. What annual rate of return did Rick earn on this account assuming no other deposits and no withdrawals?

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Answer #1

Value of the account today after initial deposit (Future Value) = $820

Calculating the Annual rate of return earned on deposit:-

where, Invested amount = $2600

Future Value = $4025

r = Periodic Interest rate

n= no of periods = 8 years

Taking 8-root on both sides,

1.05614626 = (1+r)

r = 5.6146%

So, annual rate of return did Rick earn on this account assuming no other deposits and no withdrawals is 5.6146%

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