Question

Buy a new calculator for 400. Leave it in the original wrapping for six years. Sell it to a finance nerd for 600 at that point. What is your rate of return?

Answer 1

7% per year

Step-by-step explanation:

The amount invested in the calculator was $400. The future value after six years is $600. That rate of return that results in this investment is determined by:

`FV = PV*(1+r)^t\\600=400*(1+r)^6\\1+r = \sqrt[6]{1.5}\\r=0.07 = 7\%`

The rate of return on the invest is roughly 7% per year.