Question
(a) The S&P/ASX200 price index opened the year at 5,777 and closed at 6,120 by the end of the year. The equivalent accumulation index went
(a) The S&P/ASX200 price index opened the year at 5,777 and closed at 6,120 by the end of the year. The equivalent accumulation index went from 56,240 to 64,425. What is the annual rate of return on each of these indices? Explain the difference.
(b) Using the approach covered in your textbook calculate the geometric average annual rate of return over five years given the following annual rates, year 1 = 5.10%, year 2 = 4.95%, year 3 = 4.83%, year 4 = 4.75% and year 5 = 4.70% . What is the arithmetic average? Explain the difference.
(Rates as a percentage accurate to one basis point)
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