A condominium complex was purchased by a group of private investors for $1.5 million and sold 5 year(s) later for $3.7 million. Find the annual rate of return (compounded continuously) on their investment.
A) 18.06%
B) 18.47%
C) 18.90%
D) 18.19%

Question

Quizplus · Accepted Answer

The formula for continuous compounding is:A = Pe^(rt)where:A is the final amountP is the initial amounte is the base of the natural logarithm (approximately 2.71828)r is the annual interest ratet is the time in yearsIn this case, we have:P = $1.5 millionA = $3.7 milliont = 5 yearsSubstituting these values into the formula, we get:3.7 = 1.5e^(5r)Dividing both sides by 1.5, we get:2.4666 = e^(5r)Taking the natural logarithm of both sides, we get:ln(2.4666) = 5rSolving for r, we get:r = ln(2.4666)/5 = 0.1806Therefore, the annual rate of return (compounded continuously) is 18.06%.

A Condominium Complex Was Purchased by a Group of Private