Thread: Average Annual Return

Top bond fund. An investment of $10,000 in the Emerging Country Debt Fund in 2001 was worth $24,780 in 2006. Use the formula :

r = (s/p)^1/n - 1 to find the 5-year average annual return.

MY WORK:

p = 10,000

s = 24,780

n - 1 = 2006 - 2001 = 5 and so, n = 5...Does n = 5?????

I think the formula tells me thar (s/p) is raised to the (1/n-1) power.

Originally Posted by magentarita

Top bond fund. An investment of $10,000 in the Emerging Country Debt Fund in 2001 was worth $24,780 in 2006. Use the formula :

r = (s/p)^1/n - 1 to find the 5-year average annual return.

MY WORK:

p = 10,000

s = 24,780

n - 1 = 2006 - 2001 = 5 and so, n = 5...Does n = 5????? Yes

I think the formula tells me thar (s/p) is raised to the (1/n-1) power.

The formula looks suspect to me. Are you sure it's not:



Look here:Bond Formulas

And is r the annual interest rate of return?

Originally Posted by masters

The formula looks suspect to me. Are you sure it's not:



Look here:Bond Formulas

And is r the annual interest rate of return?

Yes, the formula is as you said.

Thanks