Suppose that an investor opens and account by investing

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Suppose that an investor opens and account by investing $1,000. At the beginning of each of the next four years, he deposits additional $1,000 each year, and he liquidates the account at the end of the total five-year period. Suppose 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 geometric average returns for this investment, and determine what the investors 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?

Reference no: EM13720790

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