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7 March, 09:18

An investment of $100,000 is worth $105,000 after 3 months. If the investment keeps growing at the current rate, at the end of one year, the annualized rate of return will be:A. 5.00%B. 20.00%C. 21.55%D. 25.00%

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  1. 7 March, 09:45
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    C 21.55%

    Explanation:

    The investment grows by 5% in three months and assuming that the investment earns 5% for every three months (every quarter). Therefore every quarter investment earns 5%. The annualized return is calculated as follows:

    Annualized return = (1 + periodic return) * (1 + periodic return) ... - 1 * 100

    Annualized return = (1.05 * 1.05 * 1.05 * 1.05) - 1 * 100

    Annualized return = 21.55%
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