Concept of Rate Of Return

$7\mathrm{.}1$ If you invest $$1,000$ in a stock and its value is doubled in six years, what is the

return on your stock investment?

$7\mathrm{.}2$ Suppose you deposited $$2,000$ seven years ago and another $$2,000$ four years

ago in your savings account. If your current account balance shows $$5,833\mathrm{.}2,$

what is the rate of return on your deposit?

$7\mathrm{.}3$ You are going to buy a new car worth $$25,400.$ The dealer computes your

monthly payment to be $$515\mathrm{.}45$ for $60$ months of financing. What is the dealer's

effective rate of return on this loan transaction?

$7\mathrm{.}4$ You wish to sell a bond that has a face value of $$1,000.$ The bond bears an in$-$

terest rate of $8\%,$ which is payable semi$-$annually. Five years ago, the bond was

purchased at $$980.$ At least a $6\%$ annual return on the investment is desired.

What must be the minimum selling price of the bond now in order to make the

desired return on the investment?

Answers:

$7\mathrm{.}1$: $12\mathrm{.}25\%$

$7\mathrm{.}2$: $7\%$

$7\mathrm{.}3$: $8,34$

$7\mathrm{.}4$: $858\mathrm{.}48$