If an investor is prepared to pay $600 for an asset that returns $700 at the end of two years,what annual rate of return is the investor receiving?
A)16.7%
B)$100
C)8%
D)8.3%

Question

Quizplus · Accepted Answer

The annual rate of return can be calculated using the formula for compound interest: $ FV = PV \times (1 + r)^n $. Here, $ FV = 700 $, $ PV = 600 $, and $ n = 2 $. Solving for $ r $, we get $ r \approx 0.08 $ or 8%.

If an Investor Is Prepared to Pay $600 for an Asset