Maggie deposits $10,000 today and is promised a return of $17,000 in eight years. What is the implied annual rate of return? A. 6. 86 percent B. 7. 06 percent C. 5. 99 percent D. 6. 07 percent

A. 6,86%

Explanation:

We use the formula present value to future value and we clear the interest:

Present value (PV) = future value (FV) / (1+interest (i)) ^number of periods (n)

PV=FV / (1+i) ^n

(1+i) ^n=FV/PV

(1+i) = (FV/PV) ^ (1/n)

i = ((FV/PV) ^ (1/n)) - 1

For this problem:

i = (($17,000/$10,000) ^ (1/8)) - 1

i=0,6857

i = 6,86%