Microsoft's stock price peaked at 6118% of its IPO price more than 13 years after the IPO† Suppose that $10,000 invested in Microsoft at its IPO price had been worth $600,000 (6000% of the IPO price) after exactly 13 years. What interest rate, compounded annually, does this represent? (Round your answer to two decimal places.)

Respuesta :

Answer:

37.02%

Explanation:

we need to calculate r in the following equation: FV = PV (1 + r)ⁿ

  • FV = $600,000
  • PV = $10,000
  • n = 13

$600,000 = $10,000 (1  + r)¹³

$600,000 / $10,000 = (1  + r)¹³

60 = (1  + r)¹³

¹³√60 = 1 + r

1.3702 = 1 + r

r = 1.3702 - 1 = 0.3702 or 37.02%

*to determine ¹³√60 in a non-scientific calculator, find 60∧(1/13). Determine 1/13 first, add to the calculator's memory, then 60∧MR (memory recovery)