Suppose that an investor opens an account by investing $1,000.At the beginning of each of the next four years, he deposits anadditional $1,000 each year, and he then liquidates the account atthe end of the total five-year period. Suppose that the yearlyreturns in this account, beginning in year 1, are as follows: −9percent, 17 percent, 9 percent, 14 percent, and −4 percent.
a. Calculate the arithmetic and geometricaverage returns for this investment. (Do not roundintermediate calculations. Enter your answers as a percent roundedto 2 decimal places.)
Arithmetic Return _______%
Geometric Return_______%
b. Determine what the investor’s actualdollar-weighted average return was for this five-year period.(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.)
Dollar-weighted average return
