Question

Sue is 10 years old and would like to make a down payment on a vehicle when she is 16 years old. She currently has $2,000. What rate of return must Sue receive for her investment to double by the time she is 16?

Answer 1

Answer:

The rate of return must be 12.25% per year

Explanation:

Find the calculation attached.  The aim is to increase the initial capital taking into acount that for each year the capital will be increased by the interest paid . Therefore the capital + interest paid will be the new balance from which the 12,25% will be applied again for the next 6 years.