Answer:
31%
Explanation:
The equation that describes the future value of a lump sum (A) invested for 'n' years at an annual rate 'r' compounded quarterly is:
[tex]FV = A*(1+\frac{r}{4})^{4n}[/tex]
If Thomas invested $1,000 for 6 years and wants $5,000, the interest rate must be:
[tex]6,000 = 1,000*(1+\frac{r}{4})^{4*6}\\6 = (1+\frac{r}{4})^{24}\\r=4*(\sqrt[24]{6}-1)\\r=0.31 = 31\%[/tex]
He needs a 31% interest rate.
