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a. What is the arithmetic average return over the 10 -year period? b. What is the geometric average return over the 10 -year period? c.
a. What is the arithmetic average return over the 10 -year period? b. What is the geometric average return over the 10 -year period? c. If you invested $100 at the beginning, how much would you have at the end? a. What is the arithmetic average return over the 10 -year period? The arithmetic average return over the 10 -year period is \%. (Round to two decimal places.) a. What is the arithmetic average return over the 10 -year period? b. What is the geometric average return over the 10 -year period? c. If you invested $100 at the beginning, how much would you have at the end? a. What is the arithmetic average return over the 10-year period? To find the arithmetic average return, use the following formula: R=T1(R1+R2++RT) Therefore, R=101(0.201+0.18+0.041)=0.0868 The arithmetic average return over the 10 -year period is 0.0868 or 8.68%. b. What is the geometric average return over the 10 -year period? To find the geometric average return, use the following formulas. First find the future value of investing $1 today, using the following formula: FV=$1((1+R1)(1+R2)(1+RT))FV=$1(0.7991.180.959)=1.4693 Then use the following formula and solve for R : FV=$1(1+R)10$1.4693=$1(1+R)10(1.4693)1011=RR=1.03921=0.039200 The geometric average return over the 10-year period is 0.039200 or 3.9200%. c. If you invested $100 at the beginning, how much would you have at the end? To determine how much money you would have, use the following formula: Return=((1+R1)(1+R2)(1+RT))Investment Therefore, Return=(0.7991.180.959)$100=$146.93 If you invested $100 at the beginning, at the end you would have $146.93
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