In finance, the compound annual growth rate (CAGR) for an investment 2 years after the initial investment was made can be represented by the equation CAGR = square root of E/B - 1, where E is the ending balance of the investment and B is the beginning balance of the investment. Suppose an investor made an initial investment of $2,000 that has a CAGR of 10%. Which of the following is closest to the value of the investment 2 years after the initial investment was made?

1 answer

To find the value of the investment 2 years after the initial investment was made, we can use the formula for compound interest:

Ending Balance (E) = Beginning Balance (B) × (1 + CAGR)^n

where n is the number of years. In this case, n = 2 years and CAGR = 10%.

So, the ending balance (E) will be:

E = $2,000 × (1 + 0.10)^2 = $2,000 × (1.10)^2 = $2,000 × 1.21 = $2,420

Therefore, the value of the investment 2 years after the initial investment was made is closest to $2,420.