You 100 shares of stock today for $30 per share that he purchased for $20 six years ago. Determine the average annual rate of return on Shawn's investment, assuming the stock paid no dividends. a. 25%
b. 8.33%
c. 150%
d. 7%

d. 7%

Explanation:

Calculation to Determine the average annual rate of return on Shawn's investment

Using this formula

A=P(1+r/100)^n

where,

A=future value

P=present value

r=rate of interest

n=time period.

Let plug in the formula

30=20(1+r/100)^6

(30/20)^(1/6)=1+r/100

Hence,

1+r/100=1.0699(Approximate ly)

r=(1.0699-1)*100

r=0.0699*100

r=7% Approximately

Therefore the average annual rate of return on Shawn's investment is 7%

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.