What Rate of Return in the Second Year of an Investment

question 24

Short Answer

What rate of return in the second year of an investment is required to break even after a rate of return of -20% in the first year?

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Definitions:

Accurate To The Cent

Describes a level of precision in financial calculations or measurements that are exact to the smallest denomination of currency, such as a cent in the U.S. dollar.

Periodic Interest Rate

The rate of interest charged on a loan or earned by an investment for a duration that is less than one year.

Annuity

An economic scheme that delivers a constant payment stream to a recipient, predominantly utilized in preparing for retirement.

Payment Interval

The frequency with which a recurring payment is made, such as monthly or annually.