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 >>
  5. How do I calculate my portfolio's investment returns and performance?

    Learn the basic principles underlying the data and calculations used to perform personal rates of return on investment portfolios. Read Answer >>
Related Articles
  1. 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.
  2. 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.
  3. Investing

    Income vs. Total Return: What to Consider

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

    How Google & Twitter Compete with Facebook's Instant Articles (FB, GOOG)

    Look at how Facebook's Instant Articles feature works, and how it differs from the new Accelerated Mobile Pages feature from Google and Twitter.
  5. Investing

    Calculating The Means

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

    The Most Accurate Way To Gauge Returns: The Compound Annual Growth Rate

    The compound annual growth rate, or CAGR for short, represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios and anything that ...
  7. Tech

    An Inside Look At Internal Auditors

    Find out why these number crunchers are part of every chief officer's dream team.
  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

    5 Questions You Need to Ask Your Advisor Before Investing

    To succeed in investing, you must implement a process that incorporates five critical questions.
  10. Managing Wealth

    Understanding Total Returns

    Total return measures the rate of return earned from an investment over a period of time.
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. Abnormal Return

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

    The return an investment provides over a period of time, expressed ...
  5. Yearly Rate Of Return Method

    More commonly referred to as annual percentage rate. It is the ...
  6. Accounting Rate of Return - ARR

    The amount of profit, or return, that an individual can expect ...
Hot Definitions
  1. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  2. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  3. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  4. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
  5. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  6. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
Trading Center