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e . Calculate the cumulative wealth for McDonald's for this 1 0 - year period, assuming: $ 1 , 0 0 0 invested at the

e. Calculate the cumulative wealth for McDonald's for this 10-year period, assuming:
$1,000 invested at the beginning of the 10 years.
$10,000 invested at the beginning of the 10 years.
f. The geometric mean return for the S&P 500 for this 10-year period was 1.014 percent.
Calculate the cumulative wealth for the S&P 500 for this 10-year period, assuming $1
invested at the beginning.
g. Calculate the standard deviation of these 10 years of returns for McDonald's using the
Excel function STDEV. Note: For this calculation, you can use either Rs or RRs.
Based on the information in Table 6.6, and assuming the risk information in this
table applies to the 10-year period being considered here, is McDonald's more
risky than the S&P 500, or less risky?
h. What is the biggest factor explaining McDonald's returns for 2001 and 2002?
i. For an investor who bought McDonald's stock on January 1,2005, and held it to
December 31,2010, at what annual return did this investment grow? State your answer
as an annual return.
j. Assume an investor invested $5,000 in McDonald's stock on January 1,2001, and held it
for 20 years. Also assume that the geometric mean for these 20 years is the same as the
geometric mean for the 10 years 2001-2010. Including the initial investment, how much
money would the investor have at the end of the 20 years? In other words, what is the
cumulative wealth from this investment given an initial investment of $5,000?
k. Calculate the annual return on McDonald's stock for the years 2001-2003.
I. Assume you purchased 100 shares of McDonald's stock on January 1,2007, the year
before the great financial crisis of 2008. Calculate the cumulative wealth of this position
at the close of business on December 31,2010.
m. Assume that over the next five years the returns on the S&P 500 are 6 percent, 2.5
percent, 4 percent, 5.2 percent, and 3.1 percent.
What will be the cumulative wealth per dollar invested in this index?
At what annual return did your money grow if you invested in this index at the
start of the five years?
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