Stanley Roper has 2500 that he is looking to invest His brot

Stanley Roper has $2,500 that he is looking to invest. His brother approached him with an investment opportunity that could give Patrick $4,600 in 4 years. What interest rate would the investment have to yield in order for Stanley’s brother to deliver on his promise? I get down to 4600 divided by 2500 and lost on what steps to solve the equation. Please elaborate on solution

Solution

This can be solves by The compound annual growth rate (CAGR) .

The compound annual growth rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer than one year.

To calculate compound annual growth rate, divide the end value of an investment at the end of the period in question by its present value at the beginning of that period, raise the result to the power of one divided by the period length, and subtract one from the subsequent result.

Interest Rate = (4600/2500)^0.25 -1 = 0.1647 = 16.47%