Question

An investment earns 30% the first year, earns 35% the second year, and loses 32% the third year. The total compound return over the 3 years was

a.6.45%
b.19.34%
c.131.66%
d.33.00%

Answer 1

The total compound return over the 3 years is b. 19.34%.

Step-by-step explanation:

To calculate the total compound return over the 3 years, we need to multiply the returns of each year. Let's assume we start with an initial investment of $100. In the first year, the investment earns 30%, which is $30. This brings the total to $130. In the second year, the investment earns 35% of $130, which is $45.5.

This brings the total to $175.5. In the third year, the investment loses 32% of $175.5, which is $56.16. This brings the final total to $119.34. To calculate the percentage return, we take the difference between the final total and the initial investment, which is $19.34, and divide it by the initial investment, which is $100.

This gives us a total compound return of b. 19.34%.