Calculate the rate of return earned over the unspecified time period for each of

Question

Calculate the rate of return earned over the unspecified time period for each of the investments shown below:

Investment A: Cash flow during period: -$800         Beginning-of-period value: $1,100            End-of-period value: $100

Investment B: Cash flow during period: $15,000     Beginning-of-period value: $120,000       End-of-period value: $118,000

Investment C: Cash flow during period: $7,000       Beginning-of-period value: $45,000         End-of-period value: $48,000

Investment D: Cash flow during period: $80             Beginning-of-period value: $600              End-of-period value: $500

Investment E: Cash flow during period: $1,500       Beginning-of-period value: $12,500         End-of-period value: $12,400

Explanation / Answer

Rate of return = (End of period value - Begining of period value + Cashflow during the period) / Begining of period value * 100%

Rate of return of Investment A = ($100 - $1,100 - $800) / $1,100 * 100%

= -163.64%

Rate of return of Investment B = ($118,000 - $120,000 + $1,500) / $120,000 * 100%

= -0.42%

Rate of return of Investment C = ($48,000 - $45,000 + $7,000) / $45,000 * 100%

= 22.22%

Rate of return of Investment D = ($500 - $600 + $80) / $600 * 100%

= -3.33%

Rate of return of Investment E = ($12,400 - $12,500 + $1,500) / $12,500 * 100%

= 11.20%

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