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?

Answer 1

The annual rate of return on the engineering student's investment of $4,000, which grew to $8,000 in three years, is approximately 25.99%.

Step-by-step explanation:

An engineering student invested $4,000 into aggressive stocks and sold them for $8,000 three years later.

To calculate the annual rate of return on this investment, we can use the formula for compound annual growth rate (CAGR), which is:

CAGR = (FV/PV)^(1/n) - 1

Where FV is the future value of the investment, PV is the present value, and n is the number of years.

In this case, FV = $8,000, PV = $4,000, and n = 3 years.

So, the annual rate of return is:

CAGR = ($8,000/$4,000)^(1/3) - 1 = 2 ^(1/3) - 1 ≈ 0.2599 or 25.99%

The annual rate of return for this investment is approximately 25.99%.