Question

Holding period and annual​ (investment) returns. Baker Baseball​ Cards, Inc. originally purchased the rookie card of​ Hammerin' Hank Aaron for $ 29.00 After holding the card for 5 years, Baker Baseball Cards auctioned the card for $ 203.00

a) What are the holding period return and the simple annual return on this​ investment? results in %

b) simple annual return? result in %

c) Effective annual return (EAR)

Answer 1

1.
=(Value 5 years later-Value now)/Value now
=(203-29)/203
=85.714%

2.
=Holding Period return*1/t
=85.714%*1/5
=17.143%

3.
=(Future Value/Present Value)^(1/t)-1
=(203/29)^(1/5)-1
=47.577%