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June 12th, 2018, 09:09 AM   #1
Kmm
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Question % Calculation

Amsterdam Hedge Fund invests \$3 trillion and gets \$750 billion in return in the first year. If Amsterdam Hedge Fund can maintain that performance (Return on Investment), how much return (dollar value) will they get during the five years after they invest \$5 trillion? Assume that the rate of return is compounded yearly.

They have the answer as 1526 trillion. I am getting a different number

Ratio = 750 Billion / 3000 Billion = 0.25

x / 5 trillion = 0.25
x = 1.25 trillion

I do not know if the 5 trillion is per year or per 5 years
if per year => 1.25 * 5 = Return
if per 5 years =. 1.25 /5 = Return

but either, will not give 15,26 Trillion

Last edited by skipjack; November 7th, 2018 at 10:16 PM.
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November 7th, 2018, 10:28 PM   #2
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Each year, the investment is increased by 25%, i.e. multiplied by 1.25.

In 5 years, \$5 trillion will become \$5 trillion × 1.25$^5$, which is \$15258789062500.
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