An investor buys a 100acre parcel of land for speculative pu

An investor buys a 100-acre parcel of land for speculative purposes. She pays $1,000,000 for the land on November 11, 2003. She sells the land for $1,500,000 on November 11, 2017. What compound annual rate of return did the investor earn on the land investment? Please show your work.

Solution

Future Value = Present Value*(1+i)^n Where, 1500000 = 1000000*(1+i)^14 i Annual compound rate of return 1.5 = (1+i)^14 n Life in years 1.5^(1/14) = 1+i 1.029385 = 1+i i = 0.029385 or, Annual compound rate of return 2.94%