Calculation of rate of return on the investment:
It is given that the uncle invested $118,000 in an investment 6 years ago. The investment is worth now $237,500. It means the interest earned on the investment is (237500-118000) =$119,500
The interest rate can be calculated as follows:
Interest rate = Interest Earned / (Amount invested * Years)
= 119500 / (118000*6)
=119500 / 708000
=0.1688
=16.88%
Hence the annual interest rate (rate of return) on the investment during this period must be 16.88% per year.
