Homework Answers
| Value in 2007 | 100000 | ||||
| Value in 1982 | 25000 | ||||
| CAGR= ((End value / Beg value)^(1/n))-1 | =((100000/25000)^(1/25))-1 = 5.7% | ||||
| If compounded each year @ 10% interest | =(25000)*((1+10%)^25) = 270867.65 | ||||
| So they have earned interest of 5.70% over 25 years on their initial investment of 25000 | |||||
| If 25000 invested at 10% rate 25 years ago it would have become 270867.65 which is more than what they have earned. | |||||
| Hence, They should not be bragging about how investment savvy they are because they have earned lesser returns. | |||||
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