Question

What annual rate of return is earned on a $14,000 investment when itgrows to $22.000 in five years?O9.76 percent9.56 percentO 9.11 percentO9.46 percent

Answer 1

9.46%

Explanation

Annual rate of return formula

`\text{ Annual rate of return }=[(\frac{ending\text{ value}}{initial\text{ value}})^{\frac{1}{No\text{ of years}}}-1]*100`

In this case, the ending value is $22,000, the initial value is $14,000, and the number of years is 5. Substituting these values into the formula:

`\begin{gathered} \text{ Annual rate of return }={}\lbrack((22,000)/(14,000))^{(1)/(5)}-1]*100 \\ \text{Annual rate of return }=9.46\text{ \%} \end{gathered}`