Mr. X invested ₹2000 in a mutual fund in the year 2015. The value of the fund increased to ₹3200 in year 2020. The compound annual growth rate of his investment is:
(given: $(1.6)^{\frac{1}{5}}$ = 1.098)
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) - 9.8%
$\text{Initial investment}=2000.$
$\text{Final value}=3200.$
$\text{Time}=2020-2015=5\text{ years}.$
$3200=2000(1+r)^5.$
$(1+r)^5=\frac{3200}{2000}=1.6.$
$(1+r)=(1.6)^{\frac{1}{5}}=1.098.$
$r=1.098-1=0.098.$
$\text{Compound annual growth rate}=9.8\%.$