Eight years ago, Stan purchased 10 shares of an aggressive growth mutual fund at $90 per share, for a total of $900. Today he sold all 10 shares for $4,500. What was his average annual rate of return on this investment, before tax

Average annual rate of return = 22.3%

Explanation:

The average annual rate of return can be computed using the Future value of a a single sum

FV = PV * (1+r) ^n

FV = value of investment, PV = cost of investment, r - rate of return, n - number of years

900 * (1+r) ^8 = 4500

divide both sides by 900

1+r = 4,500/900

1+r = (4.500/900) ^ (1/8)

r = (4.500/900) ^ (-10) - 1

r = 0.2228

r = 0.2228 * 100

Average annual rate of return = 22.3%