IRR 3x Money in 5 Years is equal to what percentage?

IRR 3x Money in 5 Years is equal to what percentage?

• A. 20%
• B. 25%
• C. 30%
• D. 35%

Answer: (B)

The concept being tested is how to convert a total multi-year return into an annualized rate using compounding. If your money grows to three times its amount after five years with a constant yearly return, the rate r satisfies (1 + r)^5 = 3. Solve for r: r = 3^(1/5) − 1. The fifth root of 3 is about 1.2457, so r ≈ 0.2457, i.e., roughly 24.6%. Among the given options, 25% is the closest. So the correct choice is the one around 25%. (For a quick check, (1.25)^5 ≈ 3.05, which is very close to 3.)

The concept being tested is how to convert a total multi-year return into an annualized rate using compounding. If your money grows to three times its amount after five years with a constant yearly return, the rate r satisfies (1 + r)^5 = 3. Solve for r: r = 3^(1/5) − 1.

The fifth root of 3 is about 1.2457, so r ≈ 0.2457, i.e., roughly 24.6%. Among the given options, 25% is the closest. So the correct choice is the one around 25%. (For a quick check, (1.25)^5 ≈ 3.05, which is very close to 3.)