Question

You invested $4,500 in a project which gave you a return of 13.1% the 1st year. you were quite happy, but the 2nd year wasn't as good. you lost 4.3% that year. the 3rd year was better - you made 5.9% on this investment. what was your annual average rate of return over the three years?

Answer 1

The annual average rate of return can be calculated by calculating the average of three years annual return on the investment.

It is given that the investment earned a positive return of 13.1% in the first year, a negative return of -4.3% in the second year and a positive return of 5.9% in the third year.

Hence the annual average rate of return shall be (13.1-4.3+5.9)/3 = 4.9%