Final answer:
The average rate of return, we need to calculate the annualized percentage increase. We can use the compound interest formula: A = P(1 + r/n)^(n*t), where A is the ending value, P is the starting value, r is the interest rate, n The average rate of return for the investment is approximately 14%.
Step-by-step explanation:
To find the average rate of return, we need to calculate the annualized percentage increase. We can use the compound interest formula: A = P(1 + r/n)^(n*t), where A is the ending value, P is the starting value, r is the interest rate, n is the number of times the interest is compounded per year, and t is the number of years.
In this case, the starting value is $10,000 and the ending value is $22,000 after 5 years. Plugging in these values, we get:
22,000 = 10,000(1 + r/1)^(1*5)
2.2 = (1 + r)^5
Taking the fifth root of both sides, we get:
1 + r = 2.2^(1/5)
1 + r ≈ 1.147
r ≈ 0.147
Converting this to a percentage, we find that the average rate of return is approximately 14%.