A:

A client asks an IA to calculate what rate of return must be earned to grow $10,000 to $25,000 in five years. The rate of return the IA must calculate is called:



a. Future return
b. Internal rate of return
c. Total return
d. Expected return




The correct answer is "b": internal rate of return is the value that must be solved for. While "expected return" may sound like a correct answer, the actual term used is internal rate of return.



RELATED FAQS
  1. Under what circumstances can an IA choose to sell a security for a client without ...

    A. When the transaction is less than $5,000B. When the IA decides only how many shares to sellC. When the client tells the ... Read Answer >>
  2. How is the expected market return determined when calculating market risk premium?

    Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... Read Answer >>
  3. What is the difference between a company's annual return and its annualized return?

    Understand the importance of calculating a company's annual return and its annualized return, and learn the differences between ... Read Answer >>
  4. The real rate of return is the amount of interest earned over and above the?

    The real rate of return is the amount of interest earned over and above the: a. discount rate. b. tax rate. c. inflation ... Read Answer >>
Related Articles
  1. Investing

    Calculating Annualized Total Return

    The annualized total return is the average return of an investment each year over a given time period.
  2. Investing

    Explaining Expected Return

    The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome.
  3. Insights

    What's a Real Rate of Return?

    A real rate of return is an annual percentage investment return that’s adjusted for inflation, taxes or other factors.
  4. Small Business

    Understanding the Internal Rate of Return Rule

    The internal rate of return rule is a popular method used to compare investments or projects.
  5. Investing

    How to Calculate Required Rate of Return

    The required rate of return is used by investors and corporations to evaluate investments. Find out how to calculate it.
  6. Investing

    Income vs. Total Return: What to Consider

    What should clients consider between income and total return investing?
  7. Investing

    Calculating The Means

    Learn more about the different ways you can calculate your portfolio's average return.
  8. Investing

    More Ways to Evaluate Portfolio Performance

    The Jensen measure is another tool investors use to include risk when measuring portfolio performance.
  9. Investing

    Projected Returns: Honing The Craft

    Find out how to forecast long-term returns on the three major asset classes.
  10. Investing

    Market's Total Return Range Lowest Since 1999

    An increasingly correlated market means that investors are feeling the pinch of lower returns all around.
RELATED TERMS
  1. Return

    The gain or loss of a security in a particular period. The return ...
  2. Average Return

    The simple mathematical average of a series of returns generated ...
  3. Total Return

    When measuring performance, the actual rate of return of an investment ...
  4. Target Return

    A pricing model that prices a business based on what an investor ...
  5. Abnormal Return

    A term used to describe the returns generated by a given security ...
  6. Annual Return

    The return an investment provides over a period of time, expressed ...
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  5. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  6. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
Trading Center