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Your rich uncle invested $10,000 in an aggressive (i.e., risky) mutual fund 10 years ago. Much to your uncle's chagrin, the value of his investment
Your rich uncle invested $10,000 in an aggressive (i.e., risky) mutual fund 10 years ago. Much to your uncle's chagrin, the value of his investment declined by 19.5% during the first year and then declined another 19.5% during the second year. But your uncle decided to stick with this mutual fund, reasoning that long-term sustainable growth of the U.S. economy was bound to occur and enhance the value of his mutual fund. 8 more years have passed, and your uncle's cumulative return over the 10-year period is a whopping 795%! If the value of the original investment now is $89,500.00: a. What is the spending power equivalent in terms of real dollars 10 years ago if inflation has averaged 8% per year over the past 10 years? b. What is the real compound interest (return) rate earned over the 10-year period? Your rich uncle invested $10,000 in an aggressive (i.e., risky) mutual fund 10 years ago. Much to your uncle's chagrin, the value of his investment declined by 19.5% during the first year and then declined another 19.5% during the second year. But your uncle decided to stick with this mutual fund, reasoning that long-term sustainable growth of the U.S. economy was bound to occur and enhance the value of his mutual fund. 8 more years have passed, and your uncle's cumulative return over the 10-year period is a whopping 795%! If the value of the original investment now is $89,500.00: a. What is the spending power equivalent in terms of real dollars 10 years ago if inflation has averaged 8% per year over the past 10 years? b. What is the real compound interest (return) rate earned over the 10-year period
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