To calculate the 5-year average annual return using the given formula, you need to understand the variables:
r = Average annual return
s = Final value of the investment
p = Initial value of the investment
n = Number of years
In this case:
s = $24,780
p = $10,000
n = 5 (since it's a 5-year period)
Now, let's plug these values into the formula:
r = (s/p)^(1/n) - 1
r = (24,780/10,000)^(1/5) - 1
To solve this, let's break it down step by step:
Step 1: Calculate the value inside the parentheses
24,780/10,000 = 2.478
Step 2: Calculate the exponent
(1/5) = 0.2
Step 3: Calculate the value inside the parentheses again
2.478^0.2 = 1.0831
Step 4: Subtract 1 from the result
1.0831 - 1 = 0.0831
So, the return is approximately 0.0831 or 8.31%.
Therefore, the 5-year average annual return for the investment in the Emerging Country Debt fund is 8.31%.