Question

You invest $2500 and in return two payments of $1800: one is at the end of 2 years and the other at the end of 5 years. Calculate the resulting rate of return. Submit your answer in decimal form.

Answer 1

Answer:

0.44

Explanation:

The rate of return is the ratio of profit received from an investment to the original invested amount. For this question, this can be calculated as follows:

Amount invested = $2,500

Income received at end of year 2 = $1,800

Income received at end of year 5 = $1,800

Total income received = $1,800 + $1,800 = $3,600

Profit from the investment = $3,600 - $2,500 = $1,100

Rate of return = $1,100/$2,500 = 0.44

Therefore, the resulting rate of return is 0.44.