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Calculate expected rate of return on investments

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Reference no: EM133442923

Rate of return

Douglas? Keel, a financial analyst for Orange? Industries, wishes to estimate the rate of return for two? similar-risk investments, X and Y. ? Douglas's research indicates that the immediate past returns will serve as reasonable estimates of future returns.

A year? earlier, investment X had a market value of ?$20,000?;

and investment Y had a market value of ?$55,000.

During the? year, investment X generated cash flow of ?$1,500

and investment Y generated cash flow of $6,800.

The current market values of investments X and Y are ?$21,000 and ?$55,000?, respectively.

1. Calculate the expected rate of return on investments X and Y using the most recent? year's data.

2. Assuming that the two investments are equally? risky, which one should Douglas? recommend? ? Why?

Reference no: EM133442923

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