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You invested $8000 in a savings bond. When you cash it in 5 years later, you received $9,250. Find the annual return.

Sagot :

We will find the return as follows:

[tex]AR=(\frac{\text{FVI}}{IVI})^{\frac{1}{n}}[/tex]

Here AR is the annual return, FVI is the final value of investment and IVI is the initial value of investment and n is the number of years. Now, we replace:

[tex]AR=(\frac{9250}{8000})^{\frac{1}{5}}\Rightarrow AR\approx1.029462068[/tex]

So, the annual return is approximately 1.03.

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