An engineering student decides to invest $4,000 into a few aggressive stocks. Three years later the student sells the stocks for $8,000. What is the annual rate of return for this investment? a 26%
b. 52%
c. 14%
d. 25%

a 26%

Explanation:

The computation of the annual rate of return on this investment is as follows:

Let us assume n be no of years

Now

The Annual rate of return is

= (Ending value ÷  beginning value)^1 ÷ n - 1  

= ($8,000 ÷ $4000)^1 ÷ 3 - 1

= 0.2599

= 25.99 %

= 26%

hence, the annual rate of return is 26%

Therefore the correct option is a.

We simply applied the above formula so that the correct value could come

And, the same is to be considered

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