Question

all one problem please help with all

FIGURE 10. 4 A $1 investment in different types of portfolios 1925-2014 [year-end 1925 = 51) $100.000 $27419 32 $10.000 $5,316 86 Smat company los $.000 Large company $135 18 5100 500 5 $13.10 government to Infat Treasury tells 1925 1930 1939 1940 1949 1950 1959 1960 1969 1970 1975 1980 1985 1990 1995 2000 2005 2010 Year-end Bon art, and not abood Morningstar Ine. Chikapo mwly updates work by Hogor B o x All rights reserved Education. All rights reserved. No reproduction or distribution without the pr

Answer 1

Ending value = beginning value * (1 + r)ⁿ,

where ending value = value in 2014

beginning value = value in 1925. This is $1 for all the investments.

r = geometric average annual return.

n = number of years from 1925 to 2014, which is 89 years.

(a)

$27,419.32 = $1 * (1 + r)⁸⁹

r = ($27,419.32 / $1)^1/89 - 1

r = 12.17%.

(b)

$5,316.85 = $1 * (1 + r)⁸⁹

r = ($5,316.85 / $1)^1/89 - 1

r = 10.12%.

(c)

$135.18 = $1 * (1 + r)⁸⁹

r = ($135.18 / $1)^1/89 - 1

r = 5.67%.

(d)

$20.58 = $1 * (1 + r)⁸⁹

r = ($20.58 / $1)^1/89 - 1

r = 3.46%.

(e)

$13.10 = $1 * (1 + r)⁸⁹

r = ($13.10 / $1)^1/89 - 1

r = 2.93%.