Mohammed has $500 in the bank. He wants to buy a $1,000 electric bike within 5 years.
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Question:
Mohammed has $500 in the bank. He wants to buy a $1,000 electric bike within 5 years.
Respond to the questions below: Calculate the answers precisely in Excel using one of the techniques in the mini-lecture above. Check your work using the rule of 72.
1. What annually compounded rate of interest does he need to earn to buy the bike in 5 years?
2. Is buying the bike in five years a realistic goal? Why/why not?
3. Optional: What advice would you give him?
4. Optional: What does the Rule of 72 suggest is the required rate of return?
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