Another word problem. Any help is greatly appreciated!!
An investment of $10,000 in 1997 grew to $14,309.61 in 2002. Use the formula r=(S/P)^1/n -1 to find the 5-year average annual return. Thanks!
The compound interest formula is S = P(1 + i)^n where S = the compounded sum, P = the invested amount, i = the periodic interest rate and n = the number of compounding periods.
Since you did not state an interest rate, I will assume an annual rate which derives from 14,309.61 = 10,000(1 + i)^5 yielding an annual interest rate of 7.43%.
The annual interests derived with this interest rate are $743, 798.20, 857.51, 921.23 and 989.67 for an average annual return of $861.92.
