c) 68% ; 9.03%
Holding period return | = | (P1-P0)/P0 | Where, | |||||||
= | (42-25)/25 | P0 | = | $ 25 | ||||||
= | 68% | P1 | = | $ 42 | ||||||
Holding period return | = | ((1+i)^n)-1 | Where, | |||||||
0.68 | = | ((1+i)^6)-1 | i | = | Annual return | = | ? | |||
1.68 | = | (1+i)^6 | n | = | time | = | 6 | |||
1.68 | ^(1/6) | = | 1+i | |||||||
1.090314 | = | 1+i | ||||||||
0.090314 | = | i | ||||||||
So, | ||||||||||
Annual return is | 9.03% |
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