Rashmi's grandmother deposited $100 in an investment account for her when she was born, 25 years ago.The account is now worth $1500.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 way to solve this problem using Excel is to use the RATE function, which calculates the average rate of return. The correct parameters for the function are rate (nper, pmt, pv, fv), where nper is the number of periods, pmt is the payment made each period (in this case, 0), pv is the present value (in this case, -100), and fv is the future value (in this case, 1500). Therefore, the correct formula is =RATE(25,0,-100,1500), which results in an average rate of return of 9.15%.

Rashmi's Grandmother Deposited $100 in an Investment Account for Her