Question

An investment earns 35% the first year, earns 40% the second year, and loses 37% the third year. The total compound return over the 3 years was ______. Multiple Choice 158.93% 19.07% 38.00% 6.36%

Answer 1

19.07%

Step-by-step explanation:

The computation of the total compound return over the 3 years is shown below:

= (1 + investment percentage earned in first year) × (1 + investment percentage earned in second year) × (1 + investment percentage loss in second year)

= (1 + 0.35) × (1 + 0.40) × (1 - 0.37)

= 1.35 × 1.40 × 0.63

= 1.1907

= 19.07%