Question

Calculate the annualized, compounded rate of return

for the following investment: purchase price $65,000; sale price
$850,000; holding period 30 years.

Answer 1

The annualized, compounded rate of return for the investment is approximately 18.32%.

Step-by-step explanation:

To calculate the annualized, compounded rate of return, we can use the formula:

Rate of Return = [(Sale Price / Purchase Price)^(1 / Holding Period)] - 1

Plugging in the given values:

Rate of Return = [(850,000 / 65,000)^(1 / 30)] - 1

Simplifying the calculation:

Rate of Return = (13.076923^{0.033333333}) - 1

Converting the rate to a percentage:

Rate of Return = 0.1832 * 100

So, the annualized, compounded rate of return for this investment is approximately 18.32%.