Annualized returns

In this question, we have to find an annualized return. To annualized the returns I used the BEY formula and converted months and years to days but the solution suggests that it should be solved

23 months Annualized rate =[ (1+50%) ^1/(23/12) ] -1

What is the rationale behind using the suggested formula?

Greetings friend! I believe simplest formula to use for Investment B is… 23 months Annualized rate = [(1+0.50)^(12/23)] -1.

Because you’re solving for R here, and 1 + R = 1.5^(12/23)

You stick with months because you’re given months for Investment B. It’s the cleanest most error-free way to calculate based on apples to apples. Does this help?

Cheers - good luck - you got this :+1:


yes it does. thanks a ton

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