Question
You are in a dispute with your bank over the interest you have accrued. You deposited $1000, 7 years ago, and now have a balance
You are in a dispute with your bank over the interest you have accrued. You deposited $1000, 7 years ago, and now have a balance of exactly $2000 which makes a 7 year holding rate of return of 100%. The banker, confusing average rate of return with annualized rate of return, claims you have earned an annualized rate of return of 14.286%. Being a shrewd student, calculate the correct annualized rate of return, and compute how much money you would have had if you'd indeed earned the average rate of return (14.286%) for 7 years. Report the value (B / A), where B is how much money you would have had, and A is the correct rate of return (in decimal format). Note: this ratio doesn't carry any special meaning; it's just an easy way for me to check two answers at the same time.
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