You paid $75,000 for 13 acres of land in 2005 and sold the land four years later for $120,000. What was the annualized rate of return on your investment, rounded to the nearest tenth of a
Percent?
A)9.9%
B)12.5%
C)15.0%
D)none of the above

Question

Quizplus · Accepted Answer

To calculate the annualized rate of return, we need to use the formula: 
[(Ending value/Beginning value)^(1/years)] - 1

Plugging in the values, we get: 
[(120,000/75,000)^(1/4)] - 1 = 0.125 or 12.5%

Therefore, the annualized rate of return on the investment is 12.5%, which is closest to option B. To find the annualized rate of return, we need to use the formula: 
Annualized rate of return = ((Ending value/Beginning value)^(1/number of years)) - 1

Here, the beginning value is $75,000, the ending value is $120,000, and the number of years is 4. 
Plugging in the values, we get: 
Annualized rate of return = ((120,000/75,000)^(1/4)) - 1
= (1.155^(1/4)) - 1
= 0.125 or 12.5%

Therefore, the answer is B.

You Paid $75,000 for 13 Acres of Land in 2005