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29 January, 06:54

A mining firm makes annual deposits of $500,000 into a reclamation fund for 30 years. If the firm must have $20 million when the mine is closed, what interest rate as a percentage must the investment earn?

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  1. 29 January, 06:55
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    Answer: 33.3333333% interest rate must be earned for the firm to have $20,000,000

    Explanation:

    Mining firm annual deposit

    = $500,000

    The next 30 years, the deposit will be $500,000*30=$15,000,000

    Amount the mining firm must have when closed = $20,000,000

    Interest rate (%) =

    (current amount - past amount) / past amount * 100

    Current amount = the amount the firm must have when the mine is closed = $20,000,000

    Past amount = deposit of the mining firm for 30years = $15,000,000

    Interest rate = $20,000,000-$15,000,000/$15,000,000 * 100

    $5,000,000/$15,000,000 * 100

    1/3 * 100 = 33.3333333%

    Therefore,

    33.3333333% interest rate must be earned by the mining firm to get an amount of $20,000,000 when the mine is closed.
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