Willjt

if an investment of £15,000 today will be worth £20,000 in 5 years, what is the ARR

Apparently the answer is 5.9% but I don't understand how to get to that?

P1-Brad

15,000 x 1.059 ... multiply the answer by 1.059 and do this 5 times in total (for each year, as it's an annual rate) and you get £20k ... think this is right!?

HTH

Willjt

Looks right to me Brad,
If I didn't know the answer was going to be 5.9%, how should the % increase be worked out and explained?

(Can you tell I'm trying to help someone out with their homework...mistake!)

farmer1

Using a geometric series

P1-Brad

Hard to explain on here ... but the equation is 15,000 x (X)to the power of 5 = 20,000

Therefore, do 20,000 /15,000 = 1.33 (or something, sorry, only got my phone calc here).

Then you need to find what figure multiplied by itself (5 times) = 1.33

So you're doing the 5th root (I think, as in squared root but 5) ... and that will give you the answer 1.059, or 5.9%.

HTH

Bradders