Six years ago you invested 20000 You have now 60000 What was

Six years ago, you invested $20000. You have now $60000. What was the overall ROR during 6 years? If the inflation over that period was 3% per year, what was the real ROR

Solution

1) Overall ROR (Rate of Return) during 6 Years = Current value - Original value / Original value * 100

   = 60000 - 20000 / 20000 * 100

   = 40000 / 20000 * 100

   = 200 %

2) Nominal rate of return per year = 200 / 6

= 33.33 % (Per annum)

  Real ROR = Nominal rate - Inflation rate

   = 33.33 - 3

= 30.33 % Per annum.

Conclusion:-

1.) Overall ROR during 6 Years	200 %
2.) Real ROR per annum	30.33%