Question

Three years ago, you invested $2,750. Today, it is worth $3,500. What rate of interest did you earn?

Answer 1

Answer:

Rate of interest is 8.37%

Explanation:

Future Value = $PV(1+r)^{3}$

3,500 = 2750 $(1+r)^{3}$

$\frac{3500}{2750}$ = $(1+r)^{3}$

$\sqrt[3]{\frac{3500}{2750}}$ = $\sqrt[3]{(1+r)^{3}}$

1.0837 = 1+r

r = 1.0837 - 1

r = 0.0837

r = 8.37%

Check:

3500 = 2750 $(1+0.0837)^{3}$

3500 = 3500