Eduardo bought a house for $120,000 five years ago.He has just sold it for $180,000.What annual rate of return did he earn on this investment?
A) 10%
B) 8.45%
C) 1.08%
D) 3.13%

Question

Quizplus · Accepted Answer

To calculate the annual rate of return, we need to use the following formula:

Annual rate of return = (Final value / Initial value) ^ (1/years) - 1

Plugging in the numbers from the problem, we get:

Annual rate of return = (180,000 / 120,000) ^ (1/5) - 1
                      = 1.5 ^ (1/5) - 1
                      = 0.0845 or 8.45%

Therefore, the best choice is B, as it correctly calculates the annual rate of return with the given information.

Eduardo Bought a House for $120,000 Five Years Ago