What annual rate of return is earned on a $13,000 investment made in year 2 when it grows to $17,000 by the end of year 7?
A) 10.64 percent
B) 4.28 percent
C) 8.04 percent
D) 5.51 percent

Question

Quizplus · Accepted Answer

The annual rate of return can be calculated using the formula for compound annual growth rate (CAGR): CAGR = [(Ending Value/Beginning Value)^(1/Number of Years)] - 1. Plugging in the values: CAGR = [(17000/13000)^(1/5)] - 1 = 0.0551 or 5.51 percent.

What Annual Rate of Return Is Earned on a $13,000