Calculate the Average Annual Rate of Return on an Investment

question 7

Multiple Choice

Calculate the average annual rate of return on an investment of $1000 that accumulates to $2005 in five years' time.

• A)14.93%
• B)8.8%
• C)100.5%
• D)17.63%

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Definitions:

Economic Losses

Occur when a company's total costs exceed its total revenues, indicating a negative outcome from business operations.

Representative Firm

A representative firm is a hypothetical entity in economic models used to represent the typical characteristics of firms within a particular industry or market.

Breaking Even

Breaking even refers to a financial situation where total costs and total revenues are equal, resulting in no net loss or gain for the business.

Resource Prices

The costs associated with acquiring the inputs needed for production, such as raw materials, labor, and capital.