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November 28, 2014

Homework Help: Corporate Finance

Posted by Leona on Wednesday, January 24, 2007 at 11:22pm.

An investment today of $3,3OO is worth $10,000 IN 8 YEARS. At what rate has your investment been growing(annually) over the eight years ?

For compounding rate of return:

3300*(1+r)^8 = 10000.
so
(1+r)^8 = 10000/3300 = 3.0303

My calculator has a nth root button -- so 1+r=1.14864 so r=14.864%.

(without an nth root button, you can easily get there with successive approximations using something like an EXCL spreadsheet or a hand calculator).

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