Annual percentage rate and effective annual rate

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Reference no: EM13332073

Suppose a hedge fund manager earns 1% per trading day. There are 250 trading days per year. Answer the following questions:

a) What will be your annual return on $100 invested in her fund if she allows you to reinvest in her fund the 1% you earn each day?

b) What will be you rannual return assuming she puts all of your daily earnings into a zero-interest- bearing check account and pays you everything earned at the end of the year?

c) Can you summarize when it is proper to "annualize" using APR(annual percentage rate) versues EAR (effective annual rate)?

Reference no: EM13332073

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