### Problem

At what annual interest rate must 120,000 be invested so that it will grow to be 250,000 in 9 years?

### Solution

The amount of 120,000 (PV) is invested now at the start of period 1, and needs to be compounded forward 9 years (n) to the value of 250,000 (FV).

This problem is solved using the lump sum discount rate formula as follows.

FV = 345,000 PV = 120,000 n = 9 i = (FV / PV)^{(1 / n)}- 1 i = (250,000 / 120,000)^{(1 / 9)}- 1 i = 8.50%

### Explanation

The amount of 120,000 invested today in an account earning 8.50% compound interest, will grow into an amount of 345,000 in 9 years time.

### DR1 Discount Rate Examples

This is one of many time value of money examples, discover another at the links below.

Last modified January 29th, 2019