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Consider a security whose value, at the end of each year, is given in the following table: Year Value of the Security 0 $100.00 1
Consider a security whose value, at the end of each year, is given in the following table: Year Value of the Security 0 $100.00 1 $102.50 2 $103.72 3 $101.34 4 $102.81 5 $103.95 Note that the year 0 value of the security is the initial value. (a) Calculate the annual holding period returns for the security. (b) Calculate the arithmetic average annual rate of return and the geometric average annual rate of return for the security. (c) Explain the relevance of the geometric average annual rate of return for an investor in the security.
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