You are saving money for a down payment on a house. Suppose you want to have total savings of...

Question:

You are saving money for a down payment on a house. Suppose you want to have total savings of $20,000 in 10 years time and you have currently $5,000. What annual interest rate do you need to earn on your initial investment, assuming you contribute no additional savings?

Future Value:

Future value of an asset refers to the dollar nominal value of the asset at a future date. For many financial planning decisions such as saving for retirement, future value of assets is a key piece of information. In general, the future value depends on current value, average return as well as the investment horizon.

Answer and Explanation:

The annual interest rate must be at least 14.87%.

The future value of an asset with current value {eq}F{/eq}, periodic return {eq}R{/eq}, after...

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How to Calculate Future Value: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 16
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