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erma4kov [3.2K]
3 years ago
14

A 50 year old customer receives an inheritance of $1,000,000 which he places with an investment adviser to invest with the objec

tive of safety of principal and a moderate level of income. As of the end of the first year, the portfolio is worth $1,300,000. As of the end of the second year, the portfolio is worth $1,200,000. Ignoring compounding, the approximate annual return on investment is:
Business
1 answer:
RideAnS [48]3 years ago
7 0

Answer: 10%

Explanation:

Given that :

Worth of investment = $1,000,000

Worth after 1 year = $1,300,000

Worth after 2 years = $1,200,000

From the above, investment recorded $300,000 increase after one year and $100,000 Depreciation at the end of the second year.

Therefore, Net increase:

$300,000 - $100,000 = $200,000 (after 2 years)

Therefore, average yearly/annual increase = $200,000 / 2 = $100,000

Therefore, the annual return on the investment is :

(Annual increase / investment worth) × 100%

(100,000 : 1,000,000) × 100%

0.1 × 100% = 10%

= 10%

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