Anders was given a gold coin originally purchased for $1 by his great-grandfather 50 years ago.Today the coin is worth $450.The rate of return realized on the sale of this coin is approximately equal to
A)8%
B)13%
C)50%
D)cannot be determined with the given information

Question

Quizplus · Accepted Answer

We can use the formula for calculating the annual rate of return (ROR) to find out the answer:

ROR = (ending value / beginning value)^(1/n) - 1

In this case, the beginning value is $1, the ending value is $450, and the investment period is 50 years. Plugging these values into the formula, we get:

ROR = ($450 / $1)^(1/50) - 1 = 1.1247 - 1 = 0.1247 or 12.47%

So the approximate rate of return realized on the sale of this coin is B) 13%.

Anders Was Given a Gold Coin Originally Purchased for $1