An initial investment of $41,800 fifty years ago is worth $1,533,913 today. What is the geometric average return on this investment?

A) 11.08 percent

B) 10.47 percent

C) 7.47 percent

D) 9.23 percent

E) 8.02 percent

C) 7.47%

Explanation:

Data provided in the question:

Initial investment = $41,800

Time, n = 50 years

Future value = $1,533,913

Now,

Using the formula of compounding

Future value = Initial investment * (1 + r) ⁿ

here,

r is the geometric average return

thus,

$1,533,913 = $41,800 * (1 + r) ⁵⁰

or

(1 + r) ⁵⁰ = 36.696

or

1 + r = 1.0747

or

r = 0.0747

or

r = 0.0747 * 100%

= 7.47%