An investor wants to analyze the earnings of a mutual fund account. Seven years ago, the value of the account was $20,000 and it is now worth $25,000

Question

An investor wants to analyze the earnings of a mutual fund account. Seven years ago, the value of the account was $20,000 and it is now worth $25,000 (no additional deposits were made). If the account is compared to a bank account paying interest that is compounded continuously, what interest rate would the bank account have to pay to match the mutual fund accounts earnings?

Interest Rate ≈ _____ %

Answer 1

25000 = 20000e^7r

1.25 = e^7r

ln 1.25 ≈ 7r

0.2231 ≈ 7r

0.032 ≈ r