You just paid $465 for a security that claims it will pay you $1,944 in 9 years. What is your annual rate of return?

You just paid $465 for a security that claims it will pay you $1,944 in 9 years. What is your annual rate of return? SET YOUR CALCULATOR TO 4 DECIMAL PLACES AND ROUND TO 2 DECIMAL PLACES AT THE END. DO NOT ENTER THE % SIGN. IF YOUR ANSWER IS 7.70%, FOR EXAMPLE, ENTER 7.70.

Expert Solution

Future Value in 9 years = $1944

Amount Invested = $465

Calculating the Annual Interest rate:-

Annual Interest rate = (Future Value/Amount Invested)^(1/n) - 1

where, n = no of years = 9

Annual Interest rate = ($1944/$465)^(1/9) - 1

Annual Interest rate = 1.172268 - 1

Annual Interest rate = 17.23%

jeff jeffy answered 2 years ago

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