Question

You invest 7500 into a mutual fund that is expected to earn 7% per year, how long will it take the fun to be worth 15000?

Roger bought 800 shares of a company stock for 15.34/share. He pays the broker commission of 20 dollars to buy or sell stock after one year Roger sold all his shares when they were worth 18.77/share.




A.) how much it cost to buy the stock?




B.) what is the net gain or loss?




C.) what was the rate of return?

Answer 1

10.2 years

gain is $2,704.00

rate of return is 22%

Explanation:

The it would take for mutual to double can be determined the future value formula as shown below:

=nper(rate,pmt,-pv,fv)

rate is the rate of return of 7% per year

pmt is the periodic amount placed in the mutual fund and it not applicable here

pv is the original amount invested which is $7,500

fv is the future worth of $15,000

=nper(7%,0,-7500,15000)=10.2 years

cost of shares=actual cost of purchase+broker's commission

=(800*$15.34)+$20=$12,292.00

gain on shares=sales proceeds-cost=(800*$18.77)-$20-$12,292.00=$2,704.00

rate of return=gain/original cost=$2,704.00/$12,292.00 =22%