A mining firm makes annual deposits of $500,000 into a reclamation fund for 30 years. If the firm must have $20 million when the mine is closed, what interest rate as a percentage must the investment earn?

Answer: 33.3333333% interest rate must be earned for the firm to have $20,000,000

Explanation:

Mining firm annual deposit

= $500,000

The next 30 years, the deposit will be $500,000*30=$15,000,000

Amount the mining firm must have when closed = $20,000,000

Interest rate (%) =

(current amount - past amount) / past amount * 100

Current amount = the amount the firm must have when the mine is closed = $20,000,000

Past amount = deposit of the mining firm for 30years = $15,000,000

Interest rate = $20,000,000-$15,000,000/$15,000,000 * 100

$5,000,000/$15,000,000 * 100

1/3 * 100 = 33.3333333%

Therefore,

33.3333333% interest rate must be earned by the mining firm to get an amount of $20,000,000 when the mine is closed.