Which one of the investments below offers the lowest return?Investment A: Invest $1000 for a year and receive $1100. Investment B: Invest $10,000 for 3 months and receive $10,200. Investment C: Invest $500 for half a year and receive $530.

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BlackTom AI · Accepted Answer

To evaluate which investment offers the lowest return, we need to consider the rate of return, typically annualized, rather than just the nominal dollar gain.
Option a: 'Investment B, as its annualised yield is the lowest.' This option points to the concept of annualized yield, which translates the 3-month return into a yearly rate. B grows from 10,000 to 10,200 in 3 months, a 2% gain in 3 months. Annualizing this (simple approach) gives about 8% per year; using a compounding approach would yield roughly 8.24%. Compared with A’s 10% annual yield and C’s 12% (if annualized from a 6% gain in 6 months), B indeed has the lowest annualized return among the three.
Option b: 'Investment A, as it takes one year to earn $100.' This statement describes the absolute dollar gain and the one-year time frame, which yields 10% per year, but it ignores the relative comparison to the other investments when annualized. While A yields 10% on an annual basis, the claim here doesn’t explain the full context of all options’ rates, so it’s incomplete as a justification for the lowest return.
Option c: 'Cannot be determined due to the different initial amount of dollars invested and different investing periods of the three investments.' In practical finance, comparing investments with different scales and maturities is handled by normalizing returns, typically via annualized yield or ROI over a common period. Therefore, the information provided in percentages or annualized terms is enough to compare, making this assertion misleading.
Option d: 'Investment C, as it only earns $30.' Here the statement focuses on the absolute gain of 30 dollars. While true in isolation, absolute dollar gain does not reflect efficiency or return rate. C earns 30 on a 500 principal in 6 months, which annualizes to a higher rate (12% or slightly more with compounding) than A’s 10% and B’s roughly 8–8.25%, so this option mischaracterizes “lowest return” when considering standardized rates.

In summary, the core idea is to compare investments on a common basis (annualized yield). Each incorrect choice either ignores the time-scaled rate, relies on absolute gains without context, or errs by asserting indeterminacy when a standard normalization makes comparison possible. The valid comparison shows B has the smallest annualized return among the three, while A and C offer higher rates under typical annualization conventions.}

Which one of the investments below offers the lowest return?Investment A: Invest $1000 for a year and receive $1100. Investment B: Invest $10,000 for 3 months and receive $10,200. Investment C: Invest $500 for half a year and receive $530.

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