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On August 24, 1997 (which was the 236th day of that year), the Fidelity Select Electronics Fund reported a 44.3 percent return on investments for the year to date. Calculate an annual growth rate for this fund in 1997. Explain your method and the assumptions you made.

 May 27, 2020
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For the sake of your question, let us assume you started with $100. At the end of  236th day, your $100 was worth $144.30 .

 

1 - We will calculate the daily compound interest rate of growth over the period of 236 days as follows:

[144.30 / 100]^(1/236) =1.00155512 - 1 * 100 =0.155512 % - this is the daily compound interest rate.

 

2 - We will annualize this rate as follows: [1.00155512]^365 =1.7632867 - 1 * 100 =76.32867 % - this is the annual growth rate for this fund, compounded daily.

 May 27, 2020

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