You have accumulated $8,000 toward the down payment on a piece of lake front property in rural Minnesota. You wish to accumulate $12,000 for the down payment in four years
If you choose not to contribute more new funds to your down payment fund, what rate of return must your fund earn to reach your objective in the specified time? Assume that your investment fund compounds annually.
A) 10.67% per year
B) 50.00% per year
C) 12.50% per year
D) There is not enough information to answer this question.
A
Explanation: A) r = (FV/PV)^(1/n) -1 = $12,000/$8,000 )^(1/4 ) - 1 = 10.67% per year.
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