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Firefox File Edit View History Bookmarks Tools Window Help Homework MS-2040-04 Chegg.com ii https://pilot wright .ed Search W Wright State Wings WingsExpress Pilot R Renew Check W CaTS MV Atomic Learning Print My Pilot MS-2040-04 Intro to... Homework: Extra Credit: Chapter 3 (0.5 points possible) 3.1-2.20-T Ex. Score: 0.25 of 1 pt HW Score: 75% (2.25 of 3 pts) 3 of 3 complete A company\'s stock price rose 2.3% in 2011, and in 2012, it increased 75.7% a. Compute the geometric mean rate of return for the two-year period 20 2012. (Hint: Denote an increase of 75.7% by 0.757.) b. If someone purchased S1,000 of the company\'s stock at the start of 2011, what was its value at the end of 2012? c. Over the same period, another company had a geometric mean rate of return of 9.2%. If someone purchased $1,000 of the other company\'s stock, how would its value compare to the value found in part (b)? a. The geometric mean rate of return for the two-year period 2011-2012 was Type an integer or decimal rounded to two decimal places as needed.) Enter your answer in the answer box, then click Check Answer. Clear All Check Answer Save It looks like you haven\'t started Firefox in a while. Do you want to clean it up for a fresh, like-new experience? And by the way, welcome back! 55% D Mon 5:54 PM Meshal Alsaeed Overview Help Me Solve This h View an Example Textbook Print Reset Firefox

Solution

a)

Let r = the geometric rate.

Hence,

(1+r)^2 = (1+0.023)*(1+0.757)

(1+r)^2 = 1.797411

(1 + r) = 1.340675576

r = 0.340675576 or 34.07% [ANSWER]

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b)

A = 1000*(1+0.023)*(1+0.757) = 1797.41 [answer]

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c)

In this stock,

A = 1000*(1+0.092)^2 = 1192.46 [answer]

which is smaller than that of part B.