Question

Problem 4-36 Solving for Rates (LG4-7)

You invested $3,000 in the stock market one year ago. Today, the investment is valued at $3,570.

What return did you earn? (Negative answer should be indicated by a minus sign. Do not round intermediate calculations.)

What return would you suffer next year for your investment to be valued at the original $3,000? (Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Rate of return formula= X100

Money invested in the stock market(Original value)= $3,000

Current value of the investment= $3,570

So, Rate of return= {$3,570-$3,000/$3000}*100

= 19%

Next year, the value of the investment decreases from $3,570 to $3,000,

So, Rate of return= {$3,000-$3,570/$3,570}*100

= -15.96%