Question

In: Finance

10 years ago you invested $1,000. If your investment is worth $6,000 now, what was your rate of return?

Multiple Choice

a. 17.46% +/- 1.00%

b. 10.74% +/- 1.00%

c. 13.12% +/- 1.00%

d. 19.62% +/- 1.00%

Expert Solution

The right option is (d).

Explanation:

Where FV = Future Value = $ 6,000

PV = Present Value = $1000

n = no. of years invested = 10

r = rate of return

6000 = 1000 x (1 + r )10

or, (1 + r )10= 6000/1000

or, 1 + r = (6)(1/10)

or, r = 1.196231199 - 1

or, Rate of Return = 0.196231199 = 19.6231199% or 19.62%(rounded off)

The Rate of Return is 19.62%, Fourth Option is the correct one.

Umair answered 2 years ago

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