Question

In March​ 1963, Ironman was first introduced in issue number 39 of Tales of Suspense. The original price for that issue was 15 cents. By March of 2015​, 52 years​ later, the value of this comic book had risen to ​$19 comma 886. What annual rate of interest would you have earned if you had bought the comic in 1963 and sold it in 2015 ​(52 years​ later)?

Answer 1

                                                                                                                             Answer:

Present value (PV) = $0.15

Future value   (FV) = $19,886

Numb er of years = 52 years

Interest rate (r) = ?                      

FV = PV(1 + r)n

$19,886 = $0.15(1 + r)52

$19,886 =  (1 + r )52                                                                                                                                                                                                                                    

$0.15

132,573.33 = (1 + r)52                                                                                                          

52√132,573.33 = 1 + r

1.2546 = 1 + r

1.2546 - 1 = r

r = 0.2546 = 25.46%

The annual rate of interest is 25.46%                                                                                                                                                                                                                                                                                                                              

Explanation:

In this case, we will apply the formula of future value of a lump-sum, which is equal to present value multiplied by 1 plus interest rate raised to power number of years. The future value, present value and number of years were provided with the exception of interest rate. Thus, interest rate becomes the subject of the formula.