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Year Total Return 2016 2% 2017 -12% 2018 10% 2019 18% 2020 -5% Compute the arithmetic mean return for the fund over the 5 years.
Year | Total Return |
2016 | 2% |
2017 | -12% |
2018 | 10% |
2019 | 18% |
2020 | -5% |
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- Compute the arithmetic mean return for the fund over the 5 years.
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- Compute your ending wealth for 2020 if you had invested $10,000 in the fund at the beginning of 2016.
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- Compute the annualized return (geometric mean, or CAGR) for the funds returns over the 5 years.
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- Cite one situation where you would use arithmetic mean and one where you would use annualized return. Explain why the method of calculating average return you chose is appropriate for each case.
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