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Assume you invest $100 in a portfolio that gained a 100% return in year 1 and lost 50% in year 2. How much do you
Assume you invest $100 in a portfolio that gained a 100% return in year 1 and lost 50% in year 2. How much do you have left at the end of year 2? What is the arithmetic average return over the two year period? What is the geometric return over the 2 year period? Comment using arithmetic vs. geometric averages to evaluate portfolio performance.
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