What interest rate (the nearest percent) must Charlie earn on a $226,000 investment today so that he will have $570,000 after 12 years?
A) 6%.
B) 7%.
C) 8%.
D) 9%.

Question

Quizplus · Accepted Answer

This is a compound interest problem where we need to find the interest rate. We can use the formula:

A = P(1 + r)^n

Where A is the future value, P is the present value, r is the interest rate, and n is the number of years.

Plugging in the given values, we get:

570,000 = 226,000(1 + r)^12

Simplifying:

(1 + r)^12 = 2.5248

Taking the 12th root of both sides:

1 + r = 1.08

Subtracting 1 from both sides:

r = 0.08 or 8%

Therefore, Charlie must earn an interest rate of 8% on his investment to have $570,000 after 12 years. The best choice is C.

What Interest Rate (The Nearest Percent) Must Charlie Earn on a $226,000