You are offered an investment opportunity with the guarantee that your investment will double in 5...
You are offered an investment opportunity with the guarantee that your investment will double in 5 years. Assuming annual compounding, what annual rate of return would this investment provide?
Homework Answers
We use the formula:
A=P(1+r/100)^n
where
A=future value($2x)
P=present value($x say)
r=rate of interest
n=time period.
2x=x*(1+r/100)^5
(2)^(1/5)=(1+r/100)
(1+r/100)=1.1487
r=(1.1487-1)*100
=14.87%(Approx).
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