Question

Thirty-five years ago, your mother invested $7,500. Today, that investment is worth $320,714.11. What is the average annual rate of return she earned on this investment?

a 12.95
b 12.78
c 13.60
d 13.87
e 11.33

Answer 1

The average annual rate of return on the investment is approximately 13.60%.

Step-by-step explanation:

The average annual rate of return on an investment is calculated using the formula:

Annual Rate of Return = [(Ending Value / Beginning Value)^(1/n)] - 1

In this case, the beginning value of the investment is $7,500 and the ending value is $320,714.11. The number of years the investment was held for is 35. Plugging these values into the formula, we get:
Annual Rate of Return = [(320,714.11 / 7,500)^(1/35)] - 1

After calculating, the average annual rate of return is approximately 13.60%.