Tip: 1) Find HPR HPR = (End Value - Start Value)/Start Value 2) Solve for EAR (a.k.a. annualized return) Annualized return = (1 + HPT)^(1/n) - 1

Comparison of returns.

WG Investors is looking at three different investment opportunities. Investment one is a five-year investment with a cost of

$550

What is the effective annual return for investment one, a five-year investment with a cost of

$550

and a promised payout of

$1,100

at maturity?

enter your response here%

(Round to two decimal places.)

and a promised payout of

$1,100

at maturity. Investment two is a seven-year investment with a cost of

$550

and a promised payout of

$1,595.

Investment three is a ten-year investment with a cost of

$550

and a promised payout of

$2,585.

WG Investors can take on only one of the three investments. Assuming that all three investment opportunities have the same level of risk, calculate the effective annual return for each investment, and select the best investment choice.

Question content area bottom

Part 1

What is the effective annual return for investment one, a five-year investment with a cost of

$550

and a promised payout of

$1,100

at maturity?