Kids Toy Co. has had total returns over the past five years of 0%, 7%, -2%, 10%, and 12%. What is the percentage change in wealth over the five years
A) 29%
B) 27%
C) 5.8%
D) 5.4%

Question

Quizplus · Accepted Answer

To calculate the percentage change in wealth over the five years, we need to compound the returns. This means we multiply each year's growth factor (1 + return) together and then subtract 1 to find the overall growth percentage. The calculation is as follows: (1 + 0.00) * (1 + 0.07) * (1 - 0.02) * (1 + 0.10) * (1 + 0.12) = 1.29 - 1 = 0.29 or 29%.