Rashmi's grandmother deposited $100 in an investment account for her when she was born, 25 years ago.The account is now worth $1500.What was the average rate of return on the account?
A)6.00%
B)16.67%
C)15.00%
D)11.44%

Question

Quizplus · Accepted Answer

The average rate of return can be calculated using the formula for compound interest: A = P(1 + r)^n, where A is the amount of money accumulated after n years, including interest, P is the principal amount ($100), r is the annual interest rate, and n is the time the money is invested for (25 years). Rearranging the formula to solve for r gives us r = [(A/P)^(1/n)] - 1. Substituting the given values, we get r = [(1500/100)^(1/25)] - 1 = 1.1447 - 1 = 0.1447 or 14.47%, which when rounded is approximately 14.44%.

Rashmi's Grandmother Deposited $100 in an Investment Account for Her