17. The rate of return on an investment of Rs 10 lakhs has been 20%, 18%, 5%, 18% and 25%
during the last five years. What is the average rate of return over the last five years? (Ans.: 17%)
Answers
Answer:
Average rate of return over the last five years is 17.2 %
Step-by-step explanation:
Given:
Intial investment = Rs 10,00000
The rate of return = 20%, 18%, 5%, 18% and 25%
To find :
The average rate of return over the last five years
Solution :
⇒ 20 + 18 + 5 + 18 + 25 / 5
⇒ 86 / 5
⇒ 17.2
★ Verification:
20% = Rs 2,00000
18% = Rs 1,80,000
5% = Rs 50,000
18% = Rs 1,80,000
25% = Rs 2,50,000
Average rate of return =
Average Annual Earnings / Intial investment × 100
Find the Average Annual profit
Average Annual Earnings =
Sum of profit all the years / number of years
⇒ 2,00000 + 1,80,000 + 50,000 + 1,80,000 + 2,50,000 / 5
⇒ 8,60,000 / 5
⇒ 1,72,000
Average Annual Earnings = Rs 1,72,000
Average rate of return =
Average Annual Earnings / Intial investment × 100
⇒ 1,72,000 / 10,00,000 × 100
⇒ 0.172 × 100
⇒ 17.2
Average rate of return over the last five years is 17.2 %