Question

Find the rate of return from an investment that for an initial payment of 100 Rs., yield

return of 60 Rs. at the end of each of the first two periods.​

Answer 1

Answer:

A Rate of Return (ROR) is the gain or loss of an investment over a certain period of time. In other words, the rate of return is the gain (or loss) compared to the cost of an initial investment, typically expressed in the form of a percentage. When the ROR is positive, it is considered a gain and when the ROR is negative, it reflects a loss on the investment.

Explanation:

Answer 2

Given:

An investment for an initial payment of Rs. 100, yield  return of 60 Rs. at the end of each of the first two periods.​

To find:

The rate of return

Solution:

The initial investment = Rs. 100

The ending value of the investment = Rs. 60

To find the rate of return we will use the following formula:

$\bigstar\boxed{\bold{Rate\:of\:Return = \frac{[Ending\: value\: of \: investment\:] -\: [Initial\:investment]}{Initial\:Investment}\times 100 }}\bigstar$

• The ROR is always represented in the form of a percentage.
• If the percentage is positive, then there is a profit on the investment.
• If the percentage is negative, then there is a loss on the investment.

Now, substituting the values in the formula of ROR, we get

$Rate\:of\:Return = \frac{60 -\: 100}{100}\times 100 }}$

$\implies Rate\:of\:Return = \frac{-40}{100}\times 100 }}$

$\implies \bold{Rate\:of\:Return = -40\:\%}$ ← negative percentage implies that there is a loss on investment of Rs. 100

Thus, the rate of return from an investment for an initial payment of Rs. 100, yields a  return of Rs. 60 at the end of each of the first two periods is → 40%

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