Question

Ansley purchased 100 shares of a certain stock 6 years ago for $2545.30. The stock has a steady annual percentage rate of growth and is now worth $4152.57. What is the approximate annual growth rate of the stock?

1) 8.5%

2) 26.8%

3) 2.7%

4) 0.85%

Answer 1

2

Explanation:

To find the approximate annual growth rate of the stock, we can use the formula for compound annual growth rate (CAGR):

CAGR = (Ending value / Beginning value)^(1/n) - 1

Where n is the number of years.

In this case, the beginning value is $2545.30, the ending value is $4152.57 and the number of years is 6.

So, CAGR = (4152.57 / 2545.30)^(1/6) - 1

The CAGR is approximately 26.8% which is the answer 2.