Question

Suppose an investment offers to quintuple your money in 12 months (don’t believe it). What rate of return per quarter are you being offered? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Sol: Rate of Return per Quarter = 49.53%

In 12 months there is : 12/3 = 4 Quarters

Also, quintuple means it becomes 5 times in these 4 quarters.

Therefore, Amount at the end of 12 months = Amount at beginning x (1 + rate per quarter)^{(no. of quarter in a year)}

$5 = $1 x (1 + rate per quarter)⁴

  5^(1/4) = 1 + rate per quarter

Rate per quarter = 5^(1/4) - 1

Rate per quarter = 0.4953

Therefore, Rate per quarter = 49.53%.