Question

An investor who was not as astute as he believed invested $263,000 into an account 11 years ago. Today, that account is worth $202,800. What was the annual rate of return on this account

Answer 1

Answer:

-2.33%

Explanation:

An investor who was not as astute as he believed invested $263,000 into an account 11 years ago,

Given that,

Current value of account, future value = $202,800

Value of invested amount, Present value = $263,000

Time = 11 years

$Present\ value=\frac{Future\ value}{(1+r)^{n}}$

$263,000=\frac{202,800}{(1+r)^{11}}$

$263,000(1 + r) ^ {11} = 202,800$

$(1 + r) ^ {11} = \frac{202,800}{263,000}$

$(1+r)=(0.7711026616)^{\frac{1}{11}}$

(1 + r) = 0.9766466684  

r = 0.9766466684 - 1

 = - 0.02335333157

 = - 2.33%

Therefore, the annual rate of return on this account is -2.33%.