Answer:
8.99%
Explanation:
The formula to calculate the rate of interest is:
r=(FV/PV)^1/n - 1
r= rate of interest
FV= future value= $32,375
PV= present value= $25,000
n= number of period of time= 3
Now, you can replace the values in the formula:
r=(32,375/25,000)^1/3-1
r=1.295^1/3-1
r=0.0899→8.99%
According to this, the rate of interest that Padley must earn is 8.99%.
