You made an investment of $10,000 into an account that paid you an annual interest rate of 3.3 percent for the first 7 years and 7.7 percent for the next 8 years. What was your annual rate of return over the entire 15 years?

Question

Alexandra Hardy

Business

14 January, 23:01

You made an investment of $10,000 into an account that paid you an annual interest rate of 3.3 percent for the first 7 years and 7.7 percent for the next 8 years. What was your annual rate of return over the entire 15 years?

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Brendan Kemp · Answer 1

The annual rate of return over the entire 15 years was of 5.64%.

Explanation:

Having made an investment for 15 years, with a varying interest rate, it is necessary to add all the annual interests and then divide them by the number of years to determine the average annual interest rate of said investment.

Thus, this investment had an annual interest rate of 3.3% for 7 years, and 7.7% for 8 years. Thus, it had an accumulated interest of 84.7% (3.3 x 7 + 7.7 x 8 = 84.7), which, divided by the 15 years that the investment lasted, give an average annual interest of 5.64% (84.7 / 15 = 5.64).