engineering economic 2 A woman made 5 annual endofyear purch

engineering economic

2 A woman made 5 annual end-of-year purchases of $2000 worth of common stock. The stock paid no dividends. Then after holding the stock for 10 years, she sold all the stock for $25,000. What interest rate did her investment earn?

Solution

She invested 5*$2000=$10,000 in a common stock

without dividends holding the stock for 10 years she sold it for $25000

therefore interest on investment earned would be

10000(1+r)^10=25000

(1+r)^10=2.5

r=2.5^0.1-1=9.595%

Hence he earned RoI of 9.595%