Question 1
Multiple Choice
Confidence Level
0%
The annualized return for an investor who has earned a return of 6% over a four-week period is closest to:
Explanation
To annualize a periodic return, use the formula:
Annualized Return = (1 + r_{period})^{\frac{365}{n}}-1
r_{period} = 6% = 0.06
n = 28 days (4 weeks)
Annualized Return = (1 + 0.06)^{\frac{365}{28}}-1 = 93.08%
Question 2
Multiple Choice
Confidence Level
0%
An investor earns a 10.5% return on a security over an 18-month holding period. The annualized return is closest to:
Explanation
To convert a holding period return to an annualized return, use the formula:
Annualized return = (1 + R_{HPR})^{12/n}-1
Annualized return = (1 + 1.105)^{12/18}-1 = 6.85%