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CH11Q5

Ten annual returns are listed in the following table: - 19.2% 16.4% 17.6% -49.4% 43.8% 1.9% -16.3% 46.3% 44.7% -3.2% a. What

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Answer #1
Year Return Value
1 -19.20% $   80.80
2 16.40% $   94.05
3 17.60% $ 110.60
4 -49.40% $   55.97
5 43.80% $   80.48
6 1.90% $   82.01
7 -16.30% $   68.64
8 46.30% $ 100.42
9 44.70% $ 145.31
10 -3.20% $ 140.66
Arithmetic 8.26%
Geometric 3.47%

Arithmetic Return = (R1 + R2 + ... + R10) / 10 = 8.26%

Geometric Return = [(1 + R1) x (1 + R2) ... x (1 + R10)]^(1/10) - 1 = 3.47%

Value of $100 after 10 year = PV x (1 + r)^10 = 100 x (1 + 3.47%)^10 = $140.66

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