Word problem for bonds.

[Guest]

An investment of 10,000 in 1997 in the Spartan Investment Grade Bond Fund grew to $14,309.61 in 2002 (http://www.fidelity.com). Use the formula r=(s/p)^1/n-1 to find the 5-year average annual return..

Please help to show me how this problem would be solved.

Thank you.

 

[Denis]

An investment of 10,000 in 1997 in the Spartan Investment Grade Bond Fund grew to $14,309.61 in 2002 (http://www.fidelity.com). Use the formula r=(s/p)^1/n-1 to find the 5-year average annual return..
Please help to show me how this problem would be solved.
Thank you.

The formula represents things this way:
s = future value (14309.61)
p = present value (10000)
n = number of periods, years in this case (5)
r = return rate

r = (s/p)^(1/n) - 1 ; plug in the given values:
r = (14309.61 / 10000)^(1 / 5) - 1

Now it's simply a straight calculation; can you finish it on a calculator?

 

[Guest]

word problem for bonds

Would the answer be r=71.9076?

 

[TchrQbic]

Re: word problem for bonds

Would the answer be r=71.9076?

I believe you erred in calculations somewhere ... a return rate averaging 72% is much too high.

 

[Guest]

Word problem for bonds

I reorked the calculation and now I got this -1.0122. What am I doing wrong?

 

[stapel]

I reorked the calculation and now I got this -1.0122. What am I doing wrong?

Without being able to see your steps, that is difficult to say.

Eliz.