Question

A) Anthony invested $35,000 in Quanta three years ago. Quanta's value increased by -6.80% in the 1st year, -8.00% in the 2nd year, and 6.80% in the third year. how much does he have now?

B) Brandon invested $31,000 into principal financial three years ago. principal financial's value increased by 6.60% in the 1st year, 10.80% in the 2nd year, and -7.50% in the third year. what has been his gross holding period rate of return

Answer 1

A) Anthony invested $35,000 in Quanta three years ago. Quanta's value increased by -6.80% in the 1st year, -8.00% in the 2nd year, and 6.80% in the third year. how much does he have now?

Value Now = Investment Value * (1 + first year return) * (1 + Second year return) * (1 + Third year return)

Value Now = 35000 * (1 -6.80%) * (1 - 8.00%) * (1 + 6.80%)

Value Now = 35000 * 93.20% * 92% * 106.80%

Value Now = $32051.11

B) Brandon invested $31,000 into principal financial three years ago. principal financial's value increased by 6.60% in the 1st year, 10.80% in the 2nd year, and -7.50% in the third year. what has been his gross holding period rate of return

Gross Holding return = [(1 + first year return) * (1 + Second year return) * (1 + Third year return)] - 1

Gross Holding return = (1 + 6.60%) * (1 + 10.80%) * (1 -7.50%)] - 1

Gross Holding return = 1.066 * 1.1080 * 0.925] - 1

Gross Holding return = 1.0925 - 1

Gross Holding return = 9.25%