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barxatty [35]
3 years ago
5

Suppose you hold a particular investment for 7 months. You calculate that your holding period return is 8.4 percent. What is you

r annualized return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Business
1 answer:
Leni [432]3 years ago
6 0

Answer:

The annualized return is 14.82%

Explanation:

The formula for annualized return is given as Annualized return = (1+ holding return)12/n - 1

Holding return is 8.4%

n is the holding period of 7 months

Annualized return =(1+0.084)^(12/7)-1

Annualized return =14.82%

It is wrong to simply calculate annualized return as 8,4%*12/7,which means one is taking the interest to annual interest by proportional method,as this gives 14.40%, in investment every basis point counts.

The difference between the two figures is 0.42% which could translate into millions depending on the amount invested as well as the duration of investment

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