Winston Baker will invest $25,000 in a spa that his sister is starting. He will triple his investment in six years. What is the rate of return that Winston is being promised? (Rounded to the nearest percent.)

Question

Quizplus · Accepted Answer

To triple his investment in 6 years, Winston would need to earn a compounded annual growth rate (CAGR) of approximately 12.25%. 
This is calculated by taking the cube root of 3 (since he wants to triple his money) = 1.4422495703074083. 
Then, raising this value to the power of (1/6) (since it is over 6 years) = 1.0197947172919955. 
Subtracting 1, we get 0.0197947172919955, which when multiplied by 100 gives a percentage of approximately 1.98%, or rounded to the nearest percent, 2%. 
Therefore, Winston is being promised a rate of return of 20%, which is option B.

Winston Baker Will Invest $25,000 in a Spa That His