Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1 . Following are the actual returns of the Dow Jones Industrial Average in the past 5 years Year DJIA return S&P 5 0 0

1. Following are the actual returns of the Dow Jones Industrial Average in the past 5 years
Year DJIA return S&P 500 return
201725.08%19.42%
2018-5.63%-6.24%
201922.34%28.88%
20207.25%16.26%
202118.73%26.89%
a. Just by looking at the numbers, what are your expectations for the 5-year arithmetic averages for the DJIA and the S&P 500?(i.e. is there a range of values that you
b. Calculate the 5-year arithmetic average AND the 5-year geometric average for the DJIA and the S&P 500.
c. Explain the numbers that you calculated in b for the DJIA in plain English. (i.e. if you calculated 10% for the Dows 5-year arithmetic average, what does it mean in plain English? If you calculate 11% for the Dows 5-year geometric average, what does it mean in plain English?)
d. Comparing your numbers of arithmetic averages and geometric averages, what are your take away in terms of the relationship between the 2 averages? (is one type of average always greater than the other, and more importantly, WHY?)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions