Answer:
a. 9.59% b. 44,114.35
Explanation:
a. The rate of return can be calculated using Financial Calculator by pressing 10 for N(number of years), -4000 for PV (PV=present value), 0 for PMT (because you didn't get any payments during those 10 years) and 10,000 for FV (FV= future value). You hit CPT button and then press I/Y button to find the rate of return. Without a calculator the formula is:
[tex]{\frac{ending value of an investment}{beginning value of an investment}^{\frac{1}{10} } -1[/tex]
the whole fraction is taken to the power of 1/10
b. You calculate using the formula below:
10000 × (1+ .16)^10
the ^ in the equation above means to the power of 10
