What is the annualized rate of return

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1. Assume that the 2-year holding rate of return is 40%. The average (arithmetic) rate of return is therefore 20% per year. What is the annualized (geometric) rate of return? Is the annualized rate the same as the average rate?

2. Is the compounded rate of return higher or lower than the sum of the individual rates of return? Is the annualized rate of return higher or lower than the average of the individual rates of return? Why?

Reference no: EM131234352

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