question archive Fast Growth Investment Company offers an investment that promises to triple your money in 39 months
Fast Growth Investment Company offers an investment that promises to triple your money in 39 months
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Fast Growth Investment Company offers an investment that promises to triple your money in 39 months. This investment promises to credit interest to your account every quarter, that is, the interest is compounded quarterly. What annual percentage rate (APR) must the investment earn to meet the promised return? (Hint: Find quarterly rate first.)
A.80.37%
B.67.97%
C.51.93%
D.35.27%
E.103.97%
F.87.61%
G.75.68%
H.45.01%
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Answer:
D. 35.27%
n = 39 months = 39 / 3 = 13 quarters
Rate = r /4
Future value = 3
Present value = 1
So,
we have formula for Future value,
Future value = Present value * (1 + rate)n
3 = 1 * (1 + r/4)13
3(1/13) = (1 + r/4)
1.088182 = (1 + r/4)
r/4 = 0.088182
r = 0.352729 or 35.27%
