If P 0
= 110 is the initial price of the security, P
1
= 100 is the price after you hold it for a year,
And $$X = 1$$ represents a direct payment, an asset's rate of return is equal to:
A)-8.2%.
B)-0.045%.
C)0.9%.
D)3.6%.

Question

Quizplus · Accepted Answer

The rate of return is calculated as $(P_1 - P_0 + X) / P_0$. Substituting the given values: $(100 - 110 + 1) / 110 = -9/110 = -0.0818$, which is approximately -8.2%.

If P 0 = 110 Is the Initial Price of the Security

If P 0
= 110 Is the Initial Price of the Security