You have accumulated $8,000 toward the down payment on a piece of lake front property in rural Minnesota.You wish to accumulate $12,000 for the down payment in four years.If you choose not to contribute more new funds to your down payment fund,what rate of return must your fund earn to reach your objective in the specified time? Assume that your investment fund compounds annually.
A)10.67% per year
B)50.00% per year
C)12.50% per year
D)There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

To calculate the rate of return, we can use the formula: FV = PV x (1 + r)n, where FV is the future value (in this case $12,000), PV is the present value (in this case $8,000), r is the annual interest rate, and n is the number of years (in this case 4). Rearranging the formula to solve for r, we get: r = (FV/PV)^(1/n) - 1. Substituting the values, we get: r = ($12,000/$8,000)^(1/4) - 1 = 0.1067 or 10.67%. Therefore, the answer is A.

You Have Accumulated $8,000 Toward the Down Payment on a Piece