## Related questions with answers

Question

A portfolio of non-dividend-paying stocks earned a geometric mean return of $5\%$ between January 1, 2005, and December 31, 2011. The arithmetic mean return for the same period was $6\%$. If the market value of the portfolio at the beginning of 2005 was $\$100,000$, what was the market value of the portfolio at the end of 2011?

Solution

VerifiedStep 1

1 of 3For this calculation we need to use the geometric mean to solve for portfolio value because geometric mean is a better time weighted average for finding portfolio value. The geometric mean uses compounding to determine values which is what happens over time in a portfolio, the value compounds.

## Create a free account to view solutions

By signing up, you accept Quizlet's Terms of Service and Privacy Policy

## Create a free account to view solutions

By signing up, you accept Quizlet's Terms of Service and Privacy Policy

## Recommended textbook solutions

#### Essentials of Investments

9th Edition•ISBN: 9780078034695 (3 more)Alan J. Marcus, Alex Kane, Zvi Bodie690 solutions

#### The Economics of Money, Banking and Financial Markets

12th Edition•ISBN: 9780134855387Frederic S. Mishkin784 solutions

#### The Economics of Money, Banking, and Financial Markets

13th Edition•ISBN: 9780136894353Frederic S. Mishkin650 solutions

## More related questions

1/4

1/7