Question

You invested $8000 in a savings bond. When you cash it in 5 years later, you received $9,250. Find the annual return.

Answer 1

We will find the return as follows:

`AR=(\frac{\text{FVI}}{IVI})^{(1)/(n)}`

Here AR is the annual return, FVI is the final value of investment and IVI is the initial value of investment and n is the number of years. Now, we replace:

`AR=((9250)/(8000))^{(1)/(5)}\Rightarrow AR\approx1.029462068`

So, the annual return is approximately 1.03.