Question

Compute the total and annual returns on the described investment.

Six years after buying 200 shares of XYZ stock for ​$50 per​ share, you sell the stock for $ 15, 500.

The total return is ___%

The annual return is ___%

Answer 1

total cost = 200($50) = $10,000
total return = $15, 500
profit = $5,500

let the annual rate be i
10000(1+i)^6 = 15500
(1+i)^6 = 1.55
take 6th root of both sides
1+i = 1.55^(1/6) = 1.075776..
i = .075776..
the annual rate is appr 7.58%