Question

You invested $4,500 in a project which gave you a return of 12.5% the 1st year. You were quite happy, but the 2nd year wasn't as good. You lost 3.3% that year. The 3rd year was better - you made 5.5% on this investment. What was your annual average rate of return over the three years

Answer 1

Answer:

4.9%

Explanation:

The computation of the annual average rate of return over the three years is shown below:

Given that

Positive return in 1st year is 12.5%

The Negative return in 2nd year is 3.3%

And, the positive return in 3rd year is 5.5%

So, the annual average rate of return is

= (12.5% - 3.3% + 5.5%) ÷ (3 years)

= 4.9%