Question

If you can invest $1,000 today and it will grow to be worth $1,350 over the next 6 years, what is the compound annual return you will earn on this investment?

Answer 1

Answer:

5.13%

Explanation:

Given:

Worth of investment today (PV) = $1,000

Investment worth after 6 years (FV) = $1,350

Time period of investment (nper) = 6 Years

It is required to compute annual return (RATE). This can be computed using spreadsheet function =RATE(nper,-PV,FV).

Substituting the values, we get =RATE(6,-1000,1350)

                                                      = 5.13%

Present value is negative as it is a cash outflow.

Therefore, annual return is computes as 5.13%.