- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 1. Rates and Returns
- Subject 4. Annualized Return

###
**CFA Practice Question**

An investor invested $10,000 in an open-end mutual fund 90 days ago. Today his investment is worth only $9,874. What is his annualized rate of return?

A. -5.04%

B. -5.01%

C. -4.83%

**Explanation:**The rate of return is (9,874 - 10,000)/10,000 = -1.26%. The period is 90 days.

(1 - 0.0126)

^{(365/90)}-1 = -5.01%

###
**User Contributed Comments**
4

User |
Comment |
---|---|

ksnider |
EAY = [(1 + HPY)^(365/t)] - 1 |

dipu617 |
BAII Plus: P/Y=365 FV=9874 PV=-10000 N=90 [CPT] I/Y=-5.01% |

nrk65 |
Hi Dipu, when entered in baII plus the value of I/Y comes as 5.142% |

NOBAN |
the steps are - determine the holding period returns - 9874-10,000/10,000. = -0.0126. Note - to arrive at the annualized rate, 1 is added to -0.0126= 0.9874^365/90. Note that 1 must be deducted to finally arrive at the annualized return. Hence 0.9499 -1 =-0.0501 |