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1 year ago

Karen bought her house in 1980 for $78,500. In 2005, it was worth $850,000. What’s the rate of return on Karen’s investment?

Business

1 answer:

motikmotik1 year ago

8 0

Answer:

the rate of return on Karen investment is 10%

Explanation:

Given that

Bought price = P = $78500

Sale price = S =$850,000

Time priod = n = 25 years (1980 to 2005)

Based on the above information

The Rate of return is

= (S ÷ P)^(1 ÷ n) - 1

= ($850,000 ÷ $78,500)^(1 ÷ 25) - 1

= 0.099973

= 10.00%

hence, the rate of return on Karen investment is 10%

We simply applied the above formula

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