8. You invested $2,000 in the stock market one year ago. Today, the investment is valued at $9,500. What return did you earn? What return would you need to suffer next year for your investment to be valued at the original $2,000?
To calculate the return on your investment, you can use the formula:
Return = (Ending Value - Beginning Value) / Beginning Value
In this case, the beginning value of your investment was $2,000, and the ending value is $9,500.
Return = (9500 - 2000) / 2000 = 7500 / 2000 = 3.75
So, you earned a return of 3.75, which can also be represented as 375%.
To calculate the return needed for your investment to be valued at the original $2,000 next year, you need to determine the percentage decrease in value. This can be calculated using the formula:
Return needed = (Original Value - Ending Value) / Original Value
Substituting the given values:
Return needed = (2000 - 9500) / 2000 = -7500 / 2000 = -3.75
So, you would need a negative return of -3.75 or -375% next year for your investment to be valued at the original $2,000. Note that a negative return represents a loss.