Compute the total and annual returns on the described investment. Five years after buying 50 shares...

Question

Question

Compute the total and annual returns on the described investment.

Five years after buying 50 shares of XYZ stock for $70 per share, you sell the stock for $5200.

1-The total return is: __% (round to one decimal place as needed)

2- the annual return is:__% (round to one decimal place as needed)

Answer 1

Answer #1

1)

Beginning value = 50 * 70 = 3,500

Total return = [(Ending value - beginning value) / beginning value] * 100

Total return = [(5,200 - 3,500) / 3,500] * 100

Total return = 48.57%

2)

Annual return = (Future value / initial investment)1/n - 1

Annual return = (5200 / 3500)1/5 - 1

Annual return = (1.485714)1/5 - 1

Annual return = 1.0824 - 1

Annual return = 0.0824 or 8.24%

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Answer 2

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