Question
In: Finance
You invested $1000 in a stock portfolio 3 years ago. You contributed another $1000 1 year ago. The...
- You invested $1000 in a stock portfolio 3 years ago. You contributed another $1000 1 year ago. The current value of the portfolio is $4000. What is the rate of return (internal rate of return) of this investment?
Solutions
Expert Solution
Here,
Current value = 4000
Investment 3 years ago = 1000
Investment 1 year ago = 1000
Total investment = 2000
We do not have any information about the dividends gained on this stock, so lets assume it to be 0
Difference between the current value and investment is the profit = 4000 - 2000 = 2000
Total rate of return = Profit / total investment = 2000/2000 = 1
Adding 1 to TRR = 2
Since the investment was for 4 years, = 1/4 = 0.25
Annualized rate of return = 2^0.25 - 1 = 0.1892 = 18.92%
jeff jeffy answered 2 years agoRelated Solutions
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