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.
