Question

A customer has made an investment that pays $20 of interest during its first year and that has appreciated by $250, for a year-end value of $1,300. The customer's total return is:

Answer 1

0.2571 or 25.71%

Step-by-step explanation:

In this case, even though the initial amount invested is not given, it can be found by subtracting the amount by which the investment appreciated of the year-end value:

`A = \$1,300 - \$250\\A = \$1,050`

The return rate is given by the interest payed added to the amount appreciated, divided by the initial investment:

`r=(\$250+\$20)/(\$1,050) \\r=0.2571= 25.71\%`

The customer's total return is 0.2571 or 25.71%