Question

You invested $1,000 two years ago, and the value of your investment has increased to $1,204. What is your compounded annual rate of return over this period?

a. 6.82%

b. 7.88%

c. 9.73%

d. 10.20%

e. 11.76%

Answer 1

c. 9.73%

A		=	P*(1+i)^n		Where,
$    1,204		=	1000*(1+i)^2		A	=	$    1,204
1.204		=	(1+i)^2		P	=	$    1,000
1.204	^ (1/2)	=	1+i		i	=	?
1.097269		=	1+i		n	=	2
0.097269		=	i
So,
Annual rate of return is		9.73%