Question 389102: Can someone help me with this problem please. I do not understand how to work this out. Please show me step by step.
Top bond fund. An investment of $10,000 in the Emerging Country Debt Fund in 2001 was worth $24,780 in 2006 (www.money.com). Use the formula from the previous exercise to find the 5-year average annual return.
The formula is r=(s/p)^1/n -1
the -1 is after the rt 1/n to the right but on the same level as the (s/p) I hope that makes sense.
r=investment on annual return
S=value after n years
P=initial investment
n=number of years
Thank you very much!
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! Top bond fund. An investment of $10,000 in the Emerging Country Debt Fund in 2001 was worth $24,780 in 2006 (www.money.com). Use the formula from the previous exercise to find the 5-year average annual return.
The formula is r=(s/p)^1/n -1
---------------
S = P(1+(r/n))^(nt)
---
1+(r/n) = [s/p]^(1/nt)
----
r = n[(s/p)^(1/nt)-1]
---
r = 1[(24,780/10,000)^(1/(1*5)-1]
---
r = 2.478^(1/5)
---
r = 1.199..
Rounding you would get rate = 20%
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Cheers,
Stan H.
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