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Microsoft stock price peaked at 6118% of its IPO price more than 13 years after the IPO† Suppose that $15,000 invested in Microsoft at its IPO price had been worth $900,000 (6000% of the IPO price) after exactly 13 years. What interest rate, compounded annually, does this represent?

Respuesta :

sebastiansierraocm

Answer:

37% compounded annually

Explanation:

To find the answer we need to follow this formula:

[tex]P = I (1+ r)^{n}[/tex]

Where:

  • P = Present value of the stock
  • I = Initial value of the stock
  • r = Interest rate
  • n = number of compounding periods

Now we plug the amounts into the formula:

900,000 = 150,000 (1 + r)^13

900,000 / 150,000 = (1 + r)^13

60 = (1 + r)^13

Ln60 = 13 Ln(1 + r)

4.09 / 13 =  Ln(1 +r)

0.31 = Ln(1 + r)

e0.31 = Ln(1 + r)

1.37 = 1 + r

1.37 - 1 = r

0.7 = r

Thus, the annual interest rate is 37%

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