Answer
Her annual return on a simple interest basis is equal to 168.85%
Work Step by Step
1. Write the future value formula, and solve for "r":
$FV = PV(1 + rt)$
$FV = PV + PVrt$
$FV - PV = PVrt$
$\frac{FV - PV}{PVt} = \frac{PVrt}{PVt}$
$\frac{FV - PV}{PVt} = r$
2. Determine the necessary values:
Future Value (FV) : 45.74 (Value in August 2010)
Present Value (PV): 3.28 (Value in December 2002)
Time in years (t) : 7 years and 8 months = $7 + \frac{8}{12}$ (From Dec. 2002 to Aug. 2010)
3. Substitute these values on the formula and calculate "r":
$\frac{45.74 - 3.28}{(3.28)(7 + \frac{8}{12})} = r$
$r = 1.6885$
- Converting to %:
$r = 168.85\%$
