Suppose an investment offers to triple your money in 48 mont

Suppose an investment offers to triple your money in 48 months . What rate of return per quarter are you being offered?

Solution

FV would be $3(= $1 x 3) and

No. of periods(quarters) = 48/3 = 16

FV = PV(1 + r)ⁿ

$3 = $1(1 + r)¹⁶

To find the interest rate, we need to solve this equation on a financial calculator, using a spreadsheet, orby trial and error. If you use trial and error, remember that increasing the interest rate decreases the PVA,and decreasing the interest rate increases the PVA.

So, r = 7.1075%