If an investor purchases shares in a no-load mutual fund for $28 and after seven years...

If an investor purchases shares in a no-load mutual fund for $28 and after seven years the shares appreciate to $45, what is (1) the percentage return and (2) the annual compound rate of return using time value of money? Round your answers to two decimal places.

Percentage return: _______%

The annual compound rate of return:_______ %

Solutions

Expert Solution

Percentage return = [(Ending value - beginning value) / beginning value] * 100

Percentage return = [(45 - 28) / 28] * 100

Percentage return = 60.71%

Annual compounded return = (Ending value / beginning value)^1/n - 1

Annual compounded return = (45 / 28)^1/7 - 1

Annual compounded return = (1.60714)^1/7 - 1

Annual compounded return = 1.0701 - 1

Annual compounded return = 0.0701 or 7.01%

jeff jeffy answered 1 year ago

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