Question

A customer has made an investment that pays $20 of interest during its first year and that has appreciated by $250, for a year-end value of $1,300. The customer's total return is:

Answer 1

Answer:

0.2571 or 25.71%

Explanation:

In this case, even though the initial amount invested is not given, it can be found by subtracting the amount by which the investment appreciated of the year-end value:

$A = \ 1,300 - \ 250\\A = \ 1,050$

The return rate is given by the interest payed added to the amount appreciated, divided by the initial investment:

$r=\frac{\ 250+\ 20}{\ 1,050} \\r=0.2571= 25.71\%$

The customer's total return is 0.2571 or 25.71%