Question

Compute the total and annual returns on the following investment. Fifteen years after purchasing shares in...

Compute the total and annual returns on the following investment.

Fifteen years after purchasing shares in a mutual fund for ​$6200 the shares are sold for $11,500

1-the total return is _% (rounded to one decimal)

2-The annual return is _%

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Answer #1

Hi

Here initial Value of investment P = $6200

Sold Value F = $11,500

1) Total Return = F/P-1

= 11500/6200 - 1

= 85.48%

2) Annual return = (F/P)^(1/15) -1

= (11500/6200)^(1/15) -1

= 4.20%

Thanks

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