Answer:
interest rate r = 6.78 %
Explanation:
given data
investment = $12,000
interest rate = 3.5 percent = 0.035
time = 5 year
interest rate = 7.9 percent = 0.079
time = next 15 year
to find out
What was your annual rate of return over the entire 20 years
solution
we get here interest rate as
interest rate r = [tex][(1+r)^{t1} * (1+r)^{t2}]^{\frac{1}{t1+t2}} - 1[/tex] ...................1
here t1 is time period for first 5 year and t2 is time i.e next 15 year and r1 and r2 is rate
now put here value we get
interest rate r = [tex][(1+)^{t1} * (1+r)^{t2}]^{\frac{1}{t1+t2}} - 1[/tex]
interest rate r = [tex][(1+0.035)^{5} * (1+0.079)^{15}]^{\frac{1}{5+15}} - 1[/tex]
interest rate r = 1.0678 - 1
interest rate r = 0.0678
interest rate r = 6.78 %
