Canvas nal Examm rted Jul 7 at 1120pm uiz Instructions ect t

Canvas nal Examm rted: Jul 7 at 11:20pm uiz Instructions ect the best response to each question. Question 40 A stock fund had the following returns: Year 1:15% Year 3:-10% Year 5: 5% Year 2: 20% Year 4:-20% The cumulative and annualized (geometric) returns over the 5-year period are: 4.33% & 0.85% O 10.0% & 2.0% 0 2.0% &0.85% 10% & 1.58%

Solution

Cumulative geometric mean = {(1+0.15)+(1+0.20)+(1-0.10)+(1-0.20)+(1+0.05)} - 1 = 1.04325 - 1 = 0.04328 = 4.33%

Annualized geometric mean = {(1+0.15)+(1+0.20)+(1-0.10)+(1-0.20)+(1+0.05)}^1/5 - 1 = 1.00851 - 1 = 0.00851 = 0.85%

Hence, correct answer is 4.33% and 0.85%