Suppose that an investor opens and aacount by investing $1,000. At the beginning of each...
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Accounting
Suppose that an investor opens and aacount by investing $1,000. At the beginning of each of the next four years, he deposits aditional $1,000 ach year, and he liquidates the account at the end of the total five-year period. Suppose the the yearly returns in this account, beginning in year 1, are as follows: -9 percent, 17 percent, 9 percent, 14 percent, and 4 percent.
Calculate the arithmetic and geometic average returns for this investments, and determine what the investor;s actual dollar-weighted average return was for his five-year period. Why is the dollar-weighted average return higher or lower than the geometric average return?
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