Question

4. You purchased an investment fund since it was established for 16 months ago. Return since its inception is 12.69%. What is the annual interest earned from this fund?
____
A)    7.93%
B)    9.38%
C)    10.80%
D)    None of the above

Answer 1

Answer: Option (B) 9.38%

Let the amount invested at the beginning of the fund be $ 100

Amount in the fund after 16 Months = $ 100 + ($ 100*12.69%) = $ 112.69

Time Period in Years(n) = 16Months/12 = 1.3333 Years

Let 'i' be the Annual Interest earned from the fund

Then,

Future Value = Amount Invested * (1+i)^n

$ 112.69 = $ 100 * (1+i)^1.333

(1+i)^1.333 = $ 112.69 / $ 100

(1+i)^1.333 = 1.1269

Annual Interest Rate (i) = 9.38% (approx)