Solving for Rates What annual rate of return is earned on a $10,000 investment when it grows to $15,000 in ten years?
A) 1.50%
B) 3.97%
C) 4.14%
D) 5.00%

Question

Quizplus · Accepted Answer

To solve for the annual rate of return, we can use the compound interest formula:

A = P(1 + r/n)^(nt)

where A is the ending amount, P is the principal (initial investment), r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years.

Plugging in the given information, we get:

$15,000 = $10,000(1 + r/1)^(1 x 10)

Simplifying:

1.5 = (1 + r)^10

Taking the 10th root of both sides:

1 + r = 1.0414

Subtracting 1 from both sides:

r = 0.0414 = 4.14%

Therefore, the correct answer is C) 4.14%.

Solving for Rates What Annual Rate of Return Is Earned