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 ___%
To compute the total and annual returns on the described investment, you will need to use the following formulas:
Total Return = (Final Value - Initial Value) / Initial Value * 100
Annual Return = (Total Return)^(1 / Number of Years) - 1
Let's proceed with the calculations:
Step 1: Calculate the Initial Value
The initial value is the cost of buying 200 shares of XYZ stock for $50 per share.
Initial Value = 200 shares * $50 per share = $10,000
Step 2: Calculate the Final Value
The final value is the amount obtained after selling the stock for $15,500.
Final Value = $15,500
Step 3: Calculate the Total Return
The total return is the percentage change in value from the initial investment to the final value.
Total Return = (Final Value - Initial Value) / Initial Value * 100
Total Return = ($15,500 - $10,000) / $10,000 * 100
Total Return = $5,500 / $10,000 * 100
Total Return = 55%
Step 4: Calculate the Annual Return
The annual return is the average yearly return over the investment period.
Number of Years = 6
Annual Return = (Total Return)^(1 / Number of Years) - 1
Annual Return = (55%)^(1 / 6) - 1
Annual Return ≈ (1.823)^0.1667 - 1
Annual Return ≈ 1.0434 - 1
Annual Return ≈ 0.0434 or 4.34%
Therefore, the total return is 55%, and the annual return is approximately 4.34%.
To calculate the total return, we need to compare the current value of the investment to the initial investment.
1. Initial investment: 200 shares * $50 per share = $10,000
2. Current value: $15,500
Total return = (Current value - Initial investment) / Initial investment * 100
Total return = ($15,500 - $10,000) / $10,000 * 100
Total return = $5,500 / $10,000 * 100
Total return = 55%
To calculate the annual return, we need to know the time period over which the investment was held. Since it is not mentioned in the question, we cannot compute the annual return with the information given.
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%