Suppose you have 2 mutual funds whose annual returns are shown in the following table. Assume you invest $100 in each, and the proceeds from year 1 are reinvested in year 2 and so on.

(a) For each fund calculate the average return, the cumulative return over the ve year holding period, and the eective annual return for the ve year period.

(b) How much money do you have in each fund after 5 years?

(c) Comparing the average returns with the eective annual returns, do you see anything about this comparison that is interesting/surprising to you?