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25 May, 16:30

You invest $2500 and in return two payments of $1800: one is at the end of 2 years and the other at the end of 5 years. Calculate the resulting rate of return. Submit your answer in decimal form.

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  1. 25 May, 19:25
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    0.44

    Explanation:

    The rate of return is the ratio of profit received from an investment to the original invested amount. For this question, this can be calculated as follows:

    Amount invested = $2,500

    Income received at end of year 2 = $1,800

    Income received at end of year 5 = $1,800

    Total income received = $1,800 + $1,800 = $3,600

    Profit from the investment = $3,600 - $2,500 = $1,100

    Rate of return = $1,100/$2,500 = 0.44

    Therefore, the resulting rate of return is 0.44.
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