You wish to purchase a bar in a year for 300000 Your job has

You wish to purchase a bar in a year for $300,000. Your job has just given you a bonus of $250,000. At what interest rate must your bonus be invested at and grow this year to allow you to purchase the bar? Please calculate and show your work.

Solution

This question requires application of simple time value of money function, according to which:

FV = PV * (1 + r)ⁿ

300,000 = 250,000 * (1 + r)¹

1.2 = (1 + r)

r = 0.20

r = 20% --> Answer