Question

1. If you had $1,000 to invest into the following funds, which one would have the highest value (not including any fees) at the end of the second year?
Purple Fund with Year 1 return of +10% and Year 2 return of -9.5%
Green Fund with Year 1 return of -9.5% and Year 2 return of +10%
Orange Fund with Year 1 return of 0% & Year 2 return of 0%
Yellow Fund with Year 1 return of +30% and a year 2 return of -25%

Answer 1

The value of Orange Fund with Year 1 return of 0% & Year 2 return of 0% is highest out of all the funds. The value of the orange fund is $1,000 after two years.

Further Explanation:

Return on investment:

Return on investment refers to the earnings or net profit earned on the invested value. When the business establishes, it requires funds for the flow of the operation activities. The initial fund invested in the business is known as the investment and when the business earns the profit from the business activities, the surplus is known as return on investment. It is calculated by dividing the net profit with the total investment.

Determine the fund with the highest value at the end of second year:

Purple fund:

\begin{aligned}\text{Value at the end of second year}&=[\text{Investment}+\text{Year 1 return}]+\text{Year 2 return}\\&=[\$1,000+10\%]-9.5\%\\&=

\$995.5\end{aligned}

Thus, the value of the purple fund at the end of second year is $995.5.

Green fund:

\begin{aligned}\text{Value at the end of second year}&=[\text{Investment}+\text{Year 1 return}]+\text{Year 2 return}\\&=[\$1,000-9.5\%]+10\%\\&=

\$995.5\end{aligned}

Thus, the value of the green fund at the end of second year is $995.5.

Orange fund:

\begin{aligned}\text{Value at the end of second year}&=[\text{Investment}+\text{Year 1 return}]+\text{Year 2 return}\\&=[\$1,000+0\%]+0\%\\&=\$1,000\end{aligned}

Thus, the value of the orange fund at the end of second year is $1,000.

Yellow fund:

\begin{aligned}\text{Value at the end of second year}&=[\text{Investment}+\text{Year 1 return}]+\text{Year 2 return}\\&=[\$1,000+30\%]-25\%\\&=

\$975\end{aligned}

Thus, the value of the yellow fund at the end of second year is $975.

The value of the orange fund is highest out of all the funds. The value of the orange fund is $1,000.

Learn More:

1. Learn more about the interest rate

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2. Learn more about the expenses

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3. Learn more about the loans and saving

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Answer Details:

Grade: Middle school

Chapter: Investments  

Subject: Business

Keywords: invest, following funds, highest value, not, including, any, fees, end, of, the second, year, purple fund Year, return, year 2, green, orange, yellow, purple.

Answer 2

Orange Fund with Year 1 return of 0% & Year 2 return of 0%.