contestada

The geometric average annual return for a large capitalization stock portfolio is 10% for ten

years and 6% per year for the next five years. The geometric average annual return for the entire

15 year period is ________.

A) 9.08%

B) 8.65%

C) 8.22%

D) 9.52%

Respuesta :

Tundexi

Answer:

B) 8.65%

Explanation:

Geometric Average Return = [(1 + r1) * (1 + r2) * - - - - - * (1 + rN)]1/N - 1

Geometric Average Return = [(1 + 0.10)^10 * (1 + 0.06)^5]^1/15 - 1

Geometric Average Return = [1.10^10 * 1.06^5]^1/15 - 1

Geometric Average Return = [2.59374*1.33823]^1/15 - 1

Geometric Average Return = (3.471021)^1/15 - 1

Geometric Average Return = 1.08650188155 - 1

Geometric Average Return = 0.08650188155

Geometric Average Return = 8.65%

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