Pt = Po * (r + 1)^n.
Pt = principal after time t (62 yrs.),
Po = initial investment,
r = rate per compounding period expressed as a decimal.
n = the number of compounding periods.
55 = 0.10 * (r + 1)^62,
Divide both sides by 0.10 and Solve for r:
550 = (r + 1)^62
Take the log of both sides:
log550 = 62*log(r + 1),
divide both sides by 62:
log550 / 62 = log(r + 1),
0.04420 = log(r + 1),
10^0.04420 = r + 1,
1.107132 = r + 1,
0.107132 = r, or
r = 0.107132 = 10.7132 % = annual
percentage rate ( APR ) compounded
annually.
My son informed me that a comic book I purchased for 10 cents in 1948 is worth $55 today. What has been the average annual compound rate of return on that valuable asset?
1 answer
1 answer