Question

Financial Management Fin 3101 Section 007 Spring 2020 - JIANG Save Homework: P3 (Time Value of Money: Lump Sums) Score: 0 of 1 pt 9 of 16 (8 complete) HW Score: 50%, 8 of 16 pts P3-18 (similar to) Question Help Interest rate. Two mutual fund managers, Martha and David, have been discussing whose fund is the top performer. Martha states that investors bought shares in her mutual fund 11 years ago for $21.00, and those shares are now worth $56.00. David states that investors bought shares in his mutual fund 6 years ago for only $2.80, and they are now worth $8.40. Which mutual fund manager had the higher growth rate for the management period? Should this comparison hould this comparison be made over different management periods? Why or why not? Which mutual fund manager has had the highest growth rate for the management period? (Select the best response.) O A. David has had the highest growth rate of 9.33% for the management period. OB. Martha has had the highest growth rate of 20.09% for the management period. O C. Martha has had the highest growth rate of 9.33% for the management period. OD. David has had the highest growth rate of 20.09% for the management period altesalata odbacial boala ASLAY

answer A is not correct

Answer 1

Future value = Present value(1+Growth rate)^number of years

Martha

56 = 21(1+growth rate)^11

(1+growth rate)^11 = 2.66666

Growth rate = 9.33%

David

2.80(1+growth rate)^6 = 8.40

Growth rate = 20.096%

Hence, the answer is

D. David has the highest growth rate of 20.09% for the management period