Stephen's grandmother deposited $100 in an investment account for him when he was born, 25 years ago. The account is now worth $1,500. What was the average rate of return on the account? Which of the following is a correct way to solve this problem using EXCEL?
A) =PV(25,i,-100,1500)
B) =rate(25,0,100,1500)
C) =rate(25,0,-100,1500)
D) =rate(0,-100,1500,25)

Question

Quizplus · Accepted Answer

The correct formula to use in this situation is =RATE(nper, pmt, pv, fv) where nper is the number of periods (25 years), pmt is the periodic payment (-100 since it's a deposit), pv is the present value (0 since there is no initial investment), and fv is the future value (1500). Therefore, the correct formula would be =RATE(25,0,-100,1500), which matches choice C.

Stephen's Grandmother Deposited $100 in an Investment Account for Him