Question

Sixty years ago, your mother invested $4,500. Today, that investment is worth $430,065.11. What is the average annual rate of return she earned on this investment? A. 6.67 percent B. 11.71 percent C. 7.90 percent D. 10.40 percent E. 12.02 percent

Answer 1

Answer:

The answer is C. 7.9 percent

Explanation:

We are looking for growth rate over the sixty years(60 years) period.

The formula for growth rate is

{[Future value (FV) ÷ Present value(PV)]^1/n} - 1

Future value (FV) = $430,065.11

Present value (PV) = $4,500

Number of years(n) = 60 years

{($430,065.11 ÷ $4,500)^1/60} - 1

{(95.57)^0.0167} - 1

1.07912 - 1

= 0.07912

Expressed as a percentage:

7.9 percent.