Question

Alex invests $2,000 in a company's stock. After a year, the value of Alex's stock has increased to $2,500. What rate of return has Alex received?

Answer 1

Rate of return Alex has received is 25% .

Step-by-step explanation:

Here we have , Alex invests $2,000 in a company's stock. After a year, the value of Alex's stock has increased to $2,500. We need to find What rate of return has Alex received . Let's find out:

Alex initially invested $2000 in a company and after a year Alex's stock has increased to $2500 i.e. by :

⇒ $2500-2000$

⇒ $$500$

So, rate of return Alex has received is given by :

⇒ $\frac{2500-2000}{2000}(100)$

⇒ $\frac{500}{2000}(100)$

⇒ $\frac{50}{2}$

⇒ $25\%$

Therefore , Rate of return Alex has received is 25% .

Answer 2

The rate of interest is 25%

Explanation:

Given:

Principal, P = $2,000

Amount, A = $2500

Time, t = 1 year

Rate of Interest, r = ?

We know:

$Amount = P(1+\frac{r}{100})^t$

On substituting the value we get:

$2500 = 2000 (1 + \frac{r}{100})^1\\ \\\frac{25}{20}= (1+\frac{r}{100})$

$\frac{5}{20} = \frac{r}{100}\\ \\r = \frac{100 X 5}{20} \\\\r = 25$

Therefore, the rate of interest is 25%