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Annual effective rate earned

A Firm invests $1,000,000 at the beginning of the year. It adds another $250,000 at the end of the first quarter, withdraws $350,000 at the end of the second quarter, adds $145,000 at the end of the third quarter, and withdraws $450,000 of the remaining funds at the end of the year. It earns $20,000 of interest in the first quarter, $17,000 in the second quarter, $12,000 in the third quarter, and $29,000 in the fourth quarter.

1. What is the annual effective rate earned on the investments portfolio? (show work)

2. What rate of return would have been calculated if one only looked at the ending portfolio value as compared with the beginning $1,000,000 investment?
(show work)

Solution Summary

Calculates annual effective rate earned on investment.

$2.19