Answer
His annual return on a simple interest basis is equal to -34.69%
Work Step by Step
1. Write the future value formula, and solve for "r":
$FV = PV(1 + rt)$
$FV = PV + PVrt$
$FV - PV = PVrt$
$\frac{FV - PV}{PVt} = \frac{PVrt}{PVt}$
$\frac{FV - PV}{PVt} = r$
2. Determine the necessary values:
Future Value (FV) : 12.36 (Value in January 2007)
Present Value (PV): 33.95 (Value in March 2005)
Time in years (t) : 1 year and 10 months = $1 + \frac{10}{12}$ (From Mar. 2005 to Jan. 2007)
3. Substitute these values on the formula and calculate "r":
$\frac{12.36 - 33.95}{(33.95)(1 + \frac{10}{12})} = r$
$r = -0.3469$
- Converting to %:
$r = -34.69\%$
