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A stock price is currently $45 and is expected to be $90 in 3 years. What...

A stock price is currently $45 and is expected to be $90 in 3 years. What is it's expected annual rate of return?

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Answer #1

Answer is 25.99%

Current Price = $45.00
Expected Price in 3 years = $90.00

Current Price * (1 + Rate of Return)^Period = Expected Price
$45.00 * (1 + Rate of Return)^3 = $90.00
(1 + Rate of Return)^3 = 2.00
1 + Rate of Return = 1.2599
Rate of Return = 0.2599 or 25.99%

Therefore, expected annual rate of return is 25.99%

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