In June of 2006, AIC Limited published full-page advertisements focused on the fact that its

AIC Advantage Mutual Fund was Canada's "Best Performing Canadian Equity Fund over the 20

years" ending May 31, 2006. The equivalent annual rate of return during the 20 years was

11.9% compared to 9.9% for the benchmark S&P/TSX Composite Total Return Index. But the

advertisement failed to point out that during the second half of that 20-year period, the fund's

9.4% compounded annual return was actually less than the 10.2% growth rate for the S&P/TSX

Composite Total Return Index. Furthermore, in the final 5 years of the 20-year period, the fund's

2.4% annual rate of return was far below the index's 9.5% annual growth. The Advantage

Fund's five-year performance was even less than the

median

performance of all Canadian

equity mutual funds. In short, AIC was still trying to capitalize on the initial 10 years of truly

outstanding performance, even though the Advantage Fund's subsequent 10 years'

performance was at best mediocre.

a) What would $10,000 invested in the AIC Advantage Fund on May 31, 1986 have grown to

after 20 years?

b) What was this investment worth after the first 10 years?

c) What compound annual rate of return did the AIC Advantage Fund earn during the first 10

years of the 20-year period? Round to the nearest 0.01%.

d) To the nearest 0.01%, what was the overall percent increase in the value of an investment

in the AIC Advantage Fund during:

(i) The first 10 years?

(ii) The second 10 years?