Sara Would Like to Evaluate the Performance of Her Portfolio

question 18

Multiple Choice

Sara would like to evaluate the performance of her portfolio over the past 10 years. What compound annual rate of return has she achieved if she invested $12,000 ten years ago and now has $25,000?

• A) Between 4% and 6%
• B) Above 10%
• C) Between 8% and 10%
• D) Between 6% and 8%

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, reflecting time value of money.

Future Value

The value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.

Discount Rate

The interest rate used to calculate the present value of future cash flows.

Present Values

The today's worth of a future cash amount or cash flow series, determined by a given rate of return.