Calculate Annualized Rate of Return and Time to Grow Investment
What is the annualized rate of return on Areej's investment?
Areej's investment of BD 14,000, which grew to BD 52,600 over a period of 12 years, resulted in an annualized rate of return of?
O 11.66%
How long does it take for $14,050 to grow to $26,500 with interest rates set at 15%?
If interest rates are set at 15%, how long does it take for $14,050 to grow to $26,500?
O 4.23 years
What is the cost of trade credit for a customer who chooses to pay on day 28?
Bahrain Poultry offers its customers 2/14 net 28 for every BD100 purchase. What is the cost of trade credit to a customer who chooses to pay on day 28?
O Incomplete information provided
Annualized Rate of Return on Areej's Investment:
The annualized rate of return on Areej's investment can be calculated using the compound annual growth rate (CAGR) formula. The initial investment of BD 14,000, final value of BD 52,600, and number of years which is 12. By plugging these values into the formula, we can determine that the annualized rate of return is 11.66%.
Time to Grow Investment to $26,500 with 15% Interest Rates:
Using the formula for compound interest with the initial amount of $14,050, final amount of $26,500, and interest rate of 15%, we can calculate that it takes approximately 4.23 years for the investment to grow to $26,500.
Cost of Trade Credit for a Customer Paying on Day 28:
The information provided is incomplete and does not allow us to calculate the cost of trade credit for a customer who chooses to pay on day 28. Additional details are needed to accurately determine this cost.
To calculate the annualized rate of return on an investment, we can use the compound annual growth rate (CAGR) formula. This formula takes into account the initial investment (present value), final value (future value), and the number of years the investment has been held.
In the case of Areej's investment of BD 14,000 growing to BD 52,600 over 12 years, the CAGR formula helps us determine that the annualized rate of return on the investment is 11.66%. This means that on average, Areej's investment has grown by 11.66% each year.
On the other hand, to calculate the time it takes for an investment to grow to a certain amount with a given interest rate, we can use the formula for compound interest. By substituting the initial amount, final amount, and interest rate into the formula, we can solve for the time period required for the investment to reach the desired value.
For the trade credit cost calculation in the third question, the terms 2/14 net 28 mean that customers have 28 days to pay their invoice in full but can take a 2% discount if payment is made within 14 days. The cost of trade credit to a customer who chooses to pay on day 28 would depend on the specific details of the terms, such as the annual interest rate implied by the discount and the actual payment timing. Without these details, it is not possible to calculate the exact cost of trade credit.