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Average Annual Return on Investment Formula

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The average annual return for an investment is given by the formula
r= (s/p)^1/n -1

where p is the initial investment and s is the amount it is worth after n years. The top mutual fund for 1997 in the 3-year category was Fidelity Select-Energy Services, in which and investment of $10,000 grew to $31,895.06 from 1994 to 1997.

Find the 3-year average annual return for this fund

Solve the formula for s (the amount)

Solve the formula for p (the principal)

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The average annual return for investment formula is investigated. The solution is detailed and well presented. The response received a rating of "5/5" from the student who originally posted the question.

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Find the 3-year average annual return for this fund
This exercise can be easily solves by plugging s=31,895, p=10,000 and n=3 into the formula you provided. We have:

r= ...

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