- 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 |