Compute the total

Question

Compute the total and annual returns on the following investment.

Sixteen years after purchasing shares in a mutual fund for ​$5700​,

the shares are sold for

​$11,700.

The annual return is

The total return is

Answer 1

5700 to 11700 in 16 years

57000 = 11700(1+r)^t

570/117 = (1+t)^16

1+t = (570/117)^(1/16)

t = -1 + (570/117)^(1/16)= -1+ 1.104 = .104 = 10.4%

compounded annually

power of 1/16 = sqr(sqr(sqr(sqr(570/117))))

total return = 57000-11700 = $45,300

annual return = about .104(11700) = 104(11.7)=about $1,216.80 for the 1st year, and 10.4% higher each year

or an average return annually of 45,300/16 = $2,831.25