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:

Coupon

The percentage rate of interest a bond yields annually, based on its principal amount.

Current Yield

The annual return of an investment expressed as a percentage of its current price.

Rate of Return

The gain or loss on an investment over a specified period, proportionally expressed as a percentage of the investment's initial cost.

Capital Gains

The profit realized from the sale of assets or investments when the selling price exceeds the original purchase price.