Question

Suppose that the following table gives information about your mutual fund: Year Rate of Return 2014 2015 5.5% 20164.9% The overall rate of return between 2014 and 2016 was 4.8%. If you invested $2000 in this fund at the beginning of 2014, what would your investment be worth at the end of 2014? Round your answer to the nearest dollar.

Answer 1

In the first step, we have to fond out whats the rate of return in year 2014.

The rate of return for 2015 and 2016 is 5.5 and 4.9 and the overall rate of return is 4.8.

Suppose the return for 2014 is X.

The equation would be,

X + 5.5 + 4.9 = 4.8

Solving this we would get the value of X as -5.6

Hence the rate of return for 2014 is -5.6%

Means the investor would have been in loss in 2014.

The value of investment at the end of year 2014 would be,

2000*[100+(-5.6)]%

=2000*94.4%

=1888

The answer is 1888.