Suppose an investment offers to triple your money in 12 months (don't believe it). What rate of return per quarter are you being offered?
Triple your investment in 12 months? Per quarter means you are receiving a 75 percent return on investment every quarter. 3/4 cause quarters implies 4 in the denominator.
On this problem, theres one thing holding me up.
$3 = $1(1 + r)^(12/3)
What is r? I cant get it. I even had a sample problem along the same lines and couldn't get that on.
If an investment offers to triple your money in 12 months, we can determine the rate of return per quarter by dividing the total return by the number of quarters in a year.
In this case, tripling your money means a total return of 3 times your initial investment. So, the rate of return per quarter would be:
Rate of Return = (Total Return - 1) / Number of Quarters
where:
Total Return = 3 (since the investment offers to triple your money)
Number of Quarters = 4 (since there are 4 quarters in a year)
Rate of Return = (3 - 1) / 4
Simplifying the equation, we get:
Rate of Return = 2 / 4
Rate of Return = 0.5
Therefore, you are being offered a rate of return of 0.5 or 50% per quarter.
To determine the rate of return per quarter, we need to break down the investment period into quarters.
In this case, the investment period is 12 months, and there are four quarters in a year. Therefore, to find the rate of return per quarter, we need to calculate the percentage increase that corresponds to tripling the initial amount over four quarters.
Let's assume the initial investment amount is X.
To triple the initial investment amount, the final amount after 12 months would be 3X.
To calculate the rate of return per quarter, we need to find the total increase from the initial investment amount to the final amount after 12 months.
Total Increase = Final Amount - Initial Amount
= 3X - X
= 2X
Now, we divide the total increase by the number of quarters (four) to find the quarterly rate of return:
Rate of Return per Quarter = Total Increase / Number of Quarters
= 2X / 4
= 0.5X
Therefore, the rate of return per quarter for this investment is 0.5X.