An investment earns 10% the first year,15% the second year and loses 12% the third year.Your total compound return over the three years was ______.
A) 41.68%
B) 11.32%
C) 3.64%
D) 13.00%

Question

Quizplus · Accepted Answer

To calculate the total compound return, we need to use the formula:

[(1+R1) x (1+R2) x (1+R3)] - 1

where R1, R2, and R3 are the returns in each year.

Plugging in the values:

[(1 + 0.10) x (1 + 0.15) x (1 - 0.12)] - 1
= (1.10 x 1.15 x 0.88) - 1
= 0.1132 or 11.32%

Therefore, the correct answer is B.

An Investment Earns 10% the First Year,15% the Second Year