Stanley Roper has $2,200 that he is looking to invest. His brother approached him with an
investment opportunity that could give Patrick $4,600 in 4 years. What interest rate would the
investment have to yield in order for Stanley’s brother to deliver on his promise?
Solution
Details Amt $ Principal value invested 2,200 Maturity value 4,600
Compounding Factor = 2.091 From FV table , interest rate corresponding to
compounding factor 2.091 for 4 years is 20.25% So the investment needs to earn 20.25%
to get the required return..
Stanley Roper has $2,200 that he is looking to invest. His brother a.pdf
1. Stanley Roper has $2,200 that he is looking to invest. His brother approached him with an
investment opportunity that could give Patrick $4,600 in 4 years. What interest rate would the
investment have to yield in order for Stanley’s brother to deliver on his promise?
Solution
Details Amt $ Principal value invested 2,200 Maturity value 4,600
Compounding Factor = 2.091 From FV table , interest rate corresponding to
compounding factor 2.091 for 4 years is 20.25% So the investment needs to earn 20.25%
to get the required return.
