Solving for Rates What annual rate of return is earned on a $1,900 investment when it...

Solving for Rates What annual rate of return is earned on a $1,900 investment when it grows to $4,300 in ten years?

Multiple Choice

1.26%
2.26%
7.71%
8.51%

Expert Solution

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

4300=1900*(1+r/100)^10

(4300/1900)^(1/10)=(1+r/100)

(1+r/100)=1.0851

r=1.0851-1

=8.51%(Approx)

jeff jeffy answered 2 years ago

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