Question

Five years ago, you invested $720,000 in a portfolio. The portfolio’s annual returns in the last...

Five years ago, you invested $720,000 in a portfolio. The portfolio’s annual returns in the last five years were 20%, – 15%, 27%, 0%, and 18%. How much is your investment worth today?

A.

$1.5 million
B.

$900,000
C.

$1.1 million
D.

$1.3 million
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Homework Answers

Answer #1

Initial Portfolio Value = $720,000

Portfolio value after 5 Years = 720,000 * (1+20%) * (1-15%) * (1+27%) * (1+0%) * (1+18%) = $1,100,572

Hence, answer is C, which is $1.1 mil

The longer way to calculate the answer here would have been:

Portfolio value at Year 1, P1 = 720,000 * (1+20%)

Portfolio value at Year 2, P2 = P1 * (1-15%) = 720,000 * (1+20%) * (1-15%)

Similarly add to the chain for P3, P4 and P5, where P5 would be the final value of investment at end of year 5 as asked in question

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