Question

winston baker will invest $25,000 in a spa that his sister is starting. he will triple his investment in six years. what is the rate of return that winston is being promised? (rounded to the nearest percent.)

Answer 1

Winston Baker will put $25,000 into his sister's new spa. In six years, he will have tripled his investment. Winston has been promised a 20% rate of return.

What is meant by Rate of returns?

• The annual rate of return is the percentage change in an investment's value. For instance, if you assume a 10% annual rate of return, you are assuming that the value of your investment will rise by 10% each year.

• A rate of return (RoR) is the net gain or loss of an investment over a given time period expressed as a percentage of the initial cost of the investment.

• When you calculate the rate of return, you are calculating the percentage change from the beginning to the end of the period. ROI is calculated by subtracting the initial cost of the investment from the final value, dividing the result by the cost of the investment, and finally multiplying it by 100.

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