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A certain stock has grown continuously from 1980 to 2015. A $10,000 investment in the stock in 1980 would be worth $3,500,000 in 2015. Find the stock's average annual growth rate during this period. Round to the nearest percent.

Respuesta :

Answer:

CAGR = 18%

Step-by-step explanation:

We are given;

Initial investment; BV = $10,000

Number of years in stock; n = 2015 - 1980 = 35 years

Final worth of stock; EV = $3,500,000

Formula for compound annual growth rate is;

CAGR = [(EV/BV)^(1/n)] - 1

Plugging in the relevant values;

CAGR = [(3500000/10000)^(1/35)] - 1

CAGR = 1.1822 - 1

CAGR = 0.1822

It can also be written in percentage form as;

CAGR = 18.22% ≈ 18%