Market & Investment Performance — Practice Quiz

A Financial Math cheat sheet for Market & Investment Performance — every key formula with its symbols defined — plus a medium-level practice quiz to test recall.

Formulas & key concepts

Return on investment: the percentage gain or loss on an investment. \(FV\) is the ending value and \(PV\) the initial amount invested.

$$ROI = \dfrac{FV - PV}{PV} \times 100\%$$

The compound annual growth rate, the constant yearly rate at which an investment would have grown from \(PV\) to \(FV\) over \(t\) years.

$$CAGR = \left(\dfrac{FV}{PV}\right)^{\frac{1}{t}} - 1$$

Practice quiz

  1. An investment of $1,000$ grew to $1,250$. What is the Return on Investment (ROI)?

    • $20\%$
    • $25\%$
    • $30\%$
    • $15\%$

    Answer: $25\%$

  2. An investment of $5,000$ grew to $7,500$ over $3$ years. What is the Compound Annual Growth Rate (CAGR)?

    • Approximately $12.5\%$
    • Approximately $14.5\%$
    • Approximately $16.7\%$
    • Approximately $10.0\%$

    Answer: Approximately $14.5\%$

  3. Which financial metric is most suitable for comparing the performance of two investments made over different time durations?

    • Return on Investment (ROI)
    • Future Value (FV)
    • Present Value (PV)
    • Compound Annual Growth Rate (CAGR)

    Answer: Compound Annual Growth Rate (CAGR)

  4. If an initial investment of $2,000$ yields an ROI of $30\%$, what is the future value ($FV$) of the investment?

    • $2,300$
    • $2,600$
    • $2,060$
    • $2,900$

    Answer: $2,600$

  5. An investment had a future value ($FV$) of $13,000$ and an ROI of $30\%$. What was the initial investment ($PV$)?

    • $10,000$
    • $9,100$
    • $11,000$
    • $10,300$

    Answer: $10,000$

  6. An initial investment of $10,000$ grows at a CAGR of $8\%$ for $5$ years. What will be its future value ($FV$)?

    • Approximately $14,000$
    • Approximately $14,693$
    • Approximately $13,800$
    • Approximately $15,200$

    Answer: Approximately $14,693$

  7. An investment is expected to reach $20,000$ in $4$ years with a CAGR of $10\%$. What initial investment ($PV$) is required?

    • Approximately $13,660$
    • Approximately $14,000$
    • Approximately $15,000$
    • Approximately $12,800$

    Answer: Approximately $13,660$

  8. Investment A started with $500$ and ended with $600$. Investment B started with $1,000$ and ended with $1,150$. Which investment had a higher Return on Investment (ROI)?

    • Investment A
    • Investment B
    • Both had the same ROI
    • Cannot be determined without time period

    Answer: Investment A

  9. If an investment's Compound Annual Growth Rate (CAGR) is $0\%$, what does this imply about its future value ($FV$) relative to its present value ($PV$)?

    • $FV > PV$
    • $FV < PV$
    • $FV = PV$
    • The relationship depends on the time period $t$

    Answer: $FV = PV$

  10. An investment of $2,000$ grew to $2,600$ in $2$ years. What is its ROI and approximate CAGR?

    • ROI: $30\%$, CAGR: $14.02\%$
    • ROI: $23.08\%$, CAGR: $11.83\%$
    • ROI: $30\%$, CAGR: $15\%$
    • ROI: $23.08\%$, CAGR: $10\%$

    Answer: ROI: $30\%$, CAGR: $14.02\%$

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