Question 906 effective rate, return types, net discrete return, return distribution, price gains and returns over time
For an asset's price to double from say $1 to $2 in one year, what must its effective annual return be? Note that an effective annual return is also called a net discrete return per annum. If the price now is P0 and the price in one year is P1 then the effective annul return over the next year is:
reffective annual=P1−P0P0=NDRannual