Question

An engineering student decides to invest $4,000 into a few aggressive stocks. Three years later the student sells the stocks for $8,000. What is the annual rate of return for this investment?

a 26%
b. 52%
c. 14%
d. 25%

Answer 1

a 26%

Step-by-step explanation:

The computation of the annual rate of return on this investment is as follows:

Let us assume n be no of years

Now

The Annual rate of return is

= (Ending value ÷ beginning value)^1 ÷ n - 1

= ($8,000 ÷ $4000)^1 ÷ 3 - 1

= 0.2599

= 25.99 %

= 26%

hence, the annual rate of return is 26%

Therefore the correct option is a.

We simply applied the above formula so that the correct value could come

And, the same is to be considered