Question

The Diagonal Stamp Company, which sells used postage stamps to collectors, advertises that its average price has increased from $1 to $5 in the last 5 years. Thus, management states, investors who had purchased stamps from Diagonal 5 years ago would have received a 100% rate of return each year. What is the annual rate of return?

Answer 1

Answer

APR would be 37.97%.

Explanation:

PV = $1

FV = $5

N= 5 years

We need to compute R:

(1+r)^n = (FV/ PV)

(1+r)^5 = 5/1

1+r = 1.3797

R=37.97%