Question

What annual rate of return is earned on a $1,000 investment when it grows to $2,300 in six years? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Answer:

14.89%

Explanation:

Present value: $1,000

Future value: $2,300

Tenor = 6 years

FV = PV * (1+ rate) ^tenor

⇔2,300 = 1,000 * (1 + rate) ^6

⇔(1+rate)^6 = 2300/1000 = 2.3

⇔ 1+ rate = 2.3^(1/6) = 1.1489

=> Rate = 1.1489-1  =0.1489   = 14.89%