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Initial and Future Value

You have decided to purchase some shares of stock for $1000. After five years, the value of your purchase has grown to $2000.

a. Write a formula for the relationship between the future value of an investment and the initial investment amount. Use variables instead of actual quantities in your formula. Note what each variable represents.

b. Rearrange this formula to solve for the rate of return as a function of the other variables.

c. Use your formula from (b) to caluculate the rate of return for the actual quantities noted in the problem statement.

Solution Summary

Initial and Future Value are investigated.