Question

An ASE form planning for a future expansion deposited $30.000 each year for 5 years into a sinking investment fund that was to pay an unknown rate of return the account had a total of $450.000 immediately after the fifth deposit what rate of retum did the company make on these deposits? The rate of return that the company made was

please I want only the answer without the solution please

Answer 1

Correct Answer:

Rate of Return = 57.07%

Working note:

Let, rate of return = R

Future value after 5 years = 30000*((1+R)^5 - 1)/(R)

450000 = 30000*((1+R)^5 - 1)/(R)

At R = 57%

Future value at the end of 5 years = $449415.8

At R = 58%

Future value at the end of 5 years = $457581.7

AS per the method of extrapolation,

R = 57% + ((450000 - 449415.8)/(457581.7 - 449415.8))*(58% - 57%)

R = 57.07%