Question

Julio purchased 1,700 shares of a certain stock for $23,750 (including commissions). He sold the shares 3 year(s) later and received $32,500 after deducting commissions. Find the effective annual rate of return on his investment over the 3-year period.

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Group of answer choices

10.50%

10.59%

10.73%

11.02%

Answer 1

The annual interest rate of return during his investment was 12.28%.

Explanation:

Since Julio purchased 1,700 shares of a certain stock for $ 23,750 including commissions, and I have sold the shares 3 years later and received $ 32,500 after deducting commissions, to find the effective annual rate of return on his investment over the 3-year period the following calculation must be performed:

23,750 = 100

32,500 = X

32,500 x 100 / 23,750 = X

3,250,000 / 23,750 = X

136.84 = X

(136.84 - 100) / 3 = X

36.84 / 3 = X

12.28 = X

Therefore, the annual interest rate of return during his investment was 12.28%.