Return on investment?

Question

What rate of return in the second year of an investment will wipe out a 50% gain in the first year?

Answer 1

-33 1/3%

Answer 2

An example might help.

You have $100, which grows to $150 (a 50% gain!).

If $150 would get cut back to $100, it would be a loss of a third, so the loss is -33 1/3 %/

Answer 3

look at it like this...if something is $100 and increases 50%...then it's $150....to go back to the original price $100 then it must fall $50....50/150= 1/3.. Hope this helps.

Answer 4

(1+first year return) * (1+second year return) = (1 + total return)

( 1 + .5) ( 1 + x) = (1 + 0)
1+x = 2/3
x = -1/3 or -33.3%