Rate of returnDouglas 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

$19,000;

and investment Y had a market value of

$52,000.

During the year, investment X generated cash flow of

$1,425

and investment Y generated cash flow of

$7,468.

The current market values of investments X and Y are

$19,738

and

$52,000,

respectively.

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

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

a.The expected rate of return on investment X is

enter your response here%.

(Round to two decimal places.)