What annual rate of return is earned on a $5,000 investment when it grows to $7,000 in six years?
A) 1.40 percent
B) 5.45 percent
C) 5.77 percent
D) 40.00 percent

Question

Quizplus · Accepted Answer

The annual rate of return can be calculated using the formula for compound interest: $ A = P(1 + r)^n $. Here, $ A = 7000 $, $ P = 5000 $, and $ n = 6 $. Solving for $ r $, we get $ r \approx 0.0577 $ or 5.77%.

What Annual Rate of Return Is Earned on a $5,000