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The value of investments increased by 8 per year from 1 400 to EUR 2 800 euros. investment The average annual return was then 9,05 %. 2. 10,25 %. 3. 12,50 %.

 Oct 11, 2014

Best Answer 

 #1
avatar+118723 
+5

I think that you may be having a problem with your translator LOL.  

I think that this is what you mean.

In 8 years the value of an investment increased from 1400 euros to 2800 euros.

Find the average annual return.

Ok if I assume this is simple interest the answer is just 100%/8=12.5%

I'll explain this.

2800=2*1400  therefore in 8 years the original amount has increased by 100%

100% divided by 8 years is an average of  12.5%   each year.

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If it is compound interest the answer is more complicated. 

 

$$\\2800=1400(1+r)^8\\\\
2=(1+r)^8\\\\
2^{0.125}-1=r\\\\
r=0.090507732\\\\
r\approx 9.05\%$$

 

It should really be compound interest so I would go with  9.05%

 Oct 11, 2014
 #1
avatar+118723 
+5
Best Answer

I think that you may be having a problem with your translator LOL.  

I think that this is what you mean.

In 8 years the value of an investment increased from 1400 euros to 2800 euros.

Find the average annual return.

Ok if I assume this is simple interest the answer is just 100%/8=12.5%

I'll explain this.

2800=2*1400  therefore in 8 years the original amount has increased by 100%

100% divided by 8 years is an average of  12.5%   each year.

----------------------------------------------------------------------------------------

If it is compound interest the answer is more complicated. 

 

$$\\2800=1400(1+r)^8\\\\
2=(1+r)^8\\\\
2^{0.125}-1=r\\\\
r=0.090507732\\\\
r\approx 9.05\%$$

 

It should really be compound interest so I would go with  9.05%

Melody Oct 11, 2014

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