Question
an investment of $10,000.00 in the Emerging Country Debt fund in 2001 was worth 24,780 in 2006 money mag used the formual r=(s/p)^1/n -1 to find the 5 year average annual return. What is the return. How do I solve this
Answers
Damon
s = 24,780
p = 10,000
s/p = 2.478
(s/p)^(.2) = 1.199
subtract 1
.199
* 100 for percent --> 19.9%
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this comes from the compound interest formula for initial deposit p at interest rate r expressed as a decimal fraction for n years
amount in account = s = p * (1+r)^n
s/p = (1+r)^n
(s/p)^(1/n) = r+1
p = 10,000
s/p = 2.478
(s/p)^(.2) = 1.199
subtract 1
.199
* 100 for percent --> 19.9%
--------------------------
this comes from the compound interest formula for initial deposit p at interest rate r expressed as a decimal fraction for n years
amount in account = s = p * (1+r)^n
s/p = (1+r)^n
(s/p)^(1/n) = r+1
Debbie
Thank you very much for your help I think in the past you have help me it made more scense after i read your post...If you could i have an earlier post that Candice replied to if you could look at it and let me know your thougts it would be great.