Answered: Your grandfather placed $5,000 in a…

Your grandfather placed $5,000 in a trust fund for you. In 12 years, the fund will be worth $9,500. What is the rate of return on the trust fund (compounded annually)?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 12EB: Your friend has a trust fund that will pay her the following amounts at the given interest rate for...

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Concept explainers

Reasons for Estate Planning

Planning is a process that helps decide in advance about future activities and operations. Planning helps to draft the procedures by identifying, analyzing, and designing how to work, when to work, by whom should be done, and what has to be done. It is the primary step followed by a person, business organizations, institutions, companies, etc.

Question

Your grandfather placed $5,000 in a trust fund for you. In 12 years, the fund will be worth $9,500. What is the rate of return on the trust fund (compounded annually)?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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