Question

You purchased stock for $18,000 ten years ago. Now the stock is worth $25,000. What was your annual rate of return?

Answer 1

Answer:

3.3%

Explanation:

The yearly rate of return is calculated by taking the amount of money gained or lost at the end of the year and dividing it by the initial investment at the beginning of the year.

DATA

Future value = $25,000

Present value = $18,000

Time = 10 years

Formula:

Annual return = $(\frac{futurevalue}{presentvalue}) ^{1/time} -1$

Annual return = $(\frac{25000}{18000}) ^{1/10} -1$

Annal return = 3.3%