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25 January, 21:26

What annual rate of return is earned on a $1,000 investment when it grows to $2,300 in six years? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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  1. 25 January, 21:27
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    14.89%

    Explanation:

    Present value: $1,000

    Future value: $2,300

    Tenor = 6 years

    FV = PV * (1 + rate) ^tenor

    ⇔2,300 = 1,000 * (1 + rate) ^6

    ⇔ (1+rate) ^6 = 2300/1000 = 2.3

    ⇔ 1 + rate = 2.3^ (1/6) = 1.1489

    => Rate = 1.1489-1 = 0.1489 = 14.89%
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