Question

choose the best answer to the following question. explain your reasoning.

what is the total return on a 17-year investment?

choose the correct answer below.

a. it is the difference between the final and initial values of the investment. this shows how much money was made from the initial investment after 17 years.
b. it is the value of the investment after 17 years. the total return is equal to the overall growth over y years.
c. it is the value of the investment after 17 years. time is the only factor that affects total return. as the length of time of the investment increases, the total return increases.
d. it is the relative change in the value of the investment. the total return shows the percentage change as the value of the investment changes.
e. it is the relative change in the value of the investment. then, subtract one from this value to determine the annual return.
f. it is the difference between the final and initial values of the investment. the initial value is how much was invested and the final value is equal to the initial value plus the total return.

Explanation:

Define total return

$$ \text{Total Return} = \text{Final Value} - \text{Initial Value} $$

Evaluate the options

• Option A correctly defines total return as the absolute difference between the final and initial values, representing the total amount of money made.
• Options B and C incorrectly define it as the final value itself.
• Options D and E describe relative change (percentage return), not total return.
• Option F incorrectly states the relationship between initial value, final value, and total return in its explanation.

Answer:

• (A) It is the difference between the final and initial values of the investment. This shows how much money was made from the initial investment after 17 years. (Correct answer)
• (B) It is the value of the investment after 17 years. The total return is equal to the overall growth over Y years.
• (C) It is the value of the investment after 17 years. Time is the only factor that affects total return. As the length of time of the investment increases, the total return increases.
• (D) It is the relative change in the value of the investment. The total return shows the percentage change as the value of the investment changes.
• (E) It is the relative change in the value of the investment. Then, subtract one from this value to determine the annual return.
• (F) It is the difference between the final and initial values of the investment. The initial value is how much was invested and the final value is equal to the initial value plus the total return.