Carlita invested $10,000 for 25 years. For the first 15 years she earned 15%
Compounded semi-annually. For the last 10 years she earned 9.6% compounded monthly. What was her effective rate of return over the 25 years?
A) 13.32%
B) 10.03%
C) 15.56%
D) 12.30%
E) 14.51%

Question

Quizplus · Accepted Answer

The effective rate of return is calculated by finding the future value of the investment after 25 years and then determining the equivalent annual rate. For the first 15 years, the investment grows at 15% compounded semi-annually, and for the last 10 years, it grows at 9.6% compounded monthly. Calculating the future value for each period and then finding the equivalent annual rate gives an effective rate of approximately 13.32%.

Carlita Invested $10,000 for 25 Years