An investment of $10,000 on January 1, 1970 grew to $300,000 on January 1, 2010. What average annually compounded rate of return was earned?

Question

Quizplus · Accepted Answer

The average annually compounded rate of return can be calculated using the formula:r = (FV/PV)^(1/n) - 1where:r = average annual rate of returnFV = future valuePV = present valuen = number of yearsIn this case, the future value is $300,000, the present value is $10,000, and the number of years is 40. Plugging these values into the formula, we get:r = (300,000/10,000)^(1/40) - 1r = 8.875%Therefore, the average annually compounded rate of return was 8.875%.

An Investment of $10,000 on January 1, 1970 Grew to $300,000