Question

Bob has been investing $4,500 in stock at the end of every year for the past 11 years. If the account is currently worth $84,300, what was his annual return on this investment

Answer 1

Answer:

Annual return  = 30.52%

Explanation:

The annual return is the average rate of return earning over the investment period assuming  interest rate is compounded annually.

This can be worked using the formula below:

Annual rate of return=(C/I)^1/n - 1  × 100

C= Current value

I-Initial cost

n- Number of years

Current Value = 84,300

Initial  amount invested= 4,500

n-11

Annual return = (84,300/4,500)^(1/11) - 1  × 100

                       = 0.3052 × 100  = 30.52%

Annual return  = 30.52%