Answer:
The rate of return on this investment is 6.06%
Explanation:
Rate of return or holding period return is the rate of income earned during the period in which the investment is held. It includes any income in the form of interest received or dividend and price difference.
Interest received during 3 years = 1,000 x 6.5% x 3 = $195
Price difference = Current price - Initial Price = 1089.54 - 12,11.16 = -121.62
Rate of return = ( ( Income received + Price change ) / Initial price ) x 100
Rate of return = ( ( $195 + (-121.62) ) / 1211.16 ) x 100
Rate of return = ( $73.78 / $1,211.16 ) x 100
Rate of return = 0.0606
Rate of return = 6.06%
Holding period return is 6.06%
