Question

You buy 50 stocks of Company A, 30 of Company B, and 20 of Company C. The annual returns of these companies are 8%, 12%, and 10% respectively. The average return for one year is the closest to:______

Answer 1

Answer:

Average return for one year is 9.6 %

Explanation:

Computation of average return

Lets assume the cost of each share to be 100

                                                       Opening    Growth             Closing

                                                         Value            %                   Value

Company A  50 % at 100                5,000              8 %                 5,400

Company B 30 % at 100                 3,000              12 %                3,360    

Company C 20 % at 100                  2,000             10 %                2,200

Total values                                     10,000                                     10,960

Increase in value over base divided by base equals the average return

10,960 -  10,000  =  960/ 10000  = 9.6 % average return

Answer 2

The average return of investment is calculated to know the gain or loss of an investment in relation to its costs. The average return for one year calculated for the respective investments is the closest to 9.6%.

What is average rate of investment?

An estimate comparing the profit or loss arising from an investment related to its cost. It is useful for assessing potential return on private investment as it is useful for comparing return on several investments is called as average return on investment.

It is known as ROI which is Return on Investment.

It is calculated with the help of this formula:

$\rm\, ROI = \dfrac{Final\,Value\, of\,Investment- Initial\,Value\,of\,Investment}{Cost\,of\,Investment}\times 100\%$

As per the given information, the total initial value of the investment and the total final value of investment are calculated and presented in the image attached below.

Here, We have assumed the value of each share is $100.

Now, by applying the formula of average return on investment, we will find out the average return or ROI:

$\rm\, ROI = \dfrac{Final\,Value\, of\,Investment- Initial\,Value\,of\,Investment}{Cost\,of\,Investment}\times 100\%$$\rm\, ROI = \dfrac{\ 10,960-\ 10,000}{\ 10,000}\times 100\\\\\rm\, ROI = \dfrac{\ 960}{\ 10,000}\times 100\\\\\\ROI = 0.096\times 100\\\\ROI = 9.6\%$

Hence, The average return on investment or return on investment for one year calculated for the respective investments is the closest to 9.6%.

To learn more about average rate of investment or ROI, refer to the link:

https://brainly.com/question/7920964