An investor was afraid that he would become like King Lear in his retirement and beg hospitality from his children, so he purchased grain "tithes," or shares in farm output, for 700 pounds. The tithes paid him 73 pounds per year for 30 years. What interest rate did the he receive on this investment?

Question

Jamar Velazquez

Mathematics

29 September, 07:34

An investor was afraid that he would become like King Lear in his retirement and beg hospitality from his children, so he purchased grain "tithes," or shares in farm output, for 700 pounds. The tithes paid him 73 pounds per year for 30 years. What interest rate did the he receive on this investment?

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Answers (1)

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Alden Lang · Answer 1

5%

Step-by-step explanation:

A = P (1+r) ^n

A is the total amount the investment yields in 30 years.

Total amount = total interest + principal = (73*30) + 700 = 2,190 + 700 = 2,890 pounds

P is the principal, it is the amount that is invested. P = 700 pounds

n is the duration of the investment. n = 30 years

2,890 = 700 (1 + r) ^30

(1 + r) ^30 = 2890/700

(1 + r) ^30 = 4.13

1 + r = (4.13) ^1/30

1 + r = 1.05

r = 1.05 - 1 = 0.05 = 5%

Interest rate (r) is 5%