To calculate the rate of return on a security, you can use the formula:
Rate of Return (RoR) = (Final Value – Initial Investment) / Initial Investment * 100
In this case, the initial investment is $1,000, and the final value after 5 years is $2,000.
Plugging in the numbers, we get:
RoR = (2,000 – 1,000) / 1,000 * 100
This simplifies to:
RoR = 1,000 / 1,000 * 100
Which further simplifies to:
RoR = 100%
Therefore, the rate of return on the security over the 5-year period is 100%. This means that the investment has doubled in value over the 5 years, indicating a strong performance.