Answer:
[tex]\approx[/tex] 17.5% per annum
Step-by-step explanation:
Given:
Money invested = $20,000 at the age of 20 years.
Money expected to be $500,000 at the age of 40.
Time = 40 - 20 = 20 years
Interest is compounded annually.
To find:
Rate of growth = ?
Solution:
First of all, let us have a look at the formula for compound interest.
[tex]A = P \times (1+\frac{R}{100})^T[/tex]
Where A is the amount after T years compounding at a rate of R% per annum. P is the principal amount.
Here, We are given:
P = $20,000
A = $500,000
T = 20 years
R = ?
Putting all the values in the formula:
[tex]500000 = 20000 \times (1+\frac{R}{100})^{20}\\\Rightarrow \dfrac{500000}{20000} =(1+\frac{R}{100})^{20}\\\Rightarrow 25 =(1+\frac{R}{100})^{20}\\\Rightarrow \sqrt[20]{25} =1+\frac{R}{100}\\\Rightarrow 1.175 = 1+0.01R\\\Rightarrow R \approx17.5\%[/tex]
So, the correct answer is [tex]\approx[/tex] 17.5% per annum and compounding annually.
Answer:
16.1%
Step-by-step explanation:
(the other person is wrong, trust me)
