Question
In: Finance
A mutual fund advertises that average annual compound rate of returns for various periods ending end...
A mutual fund advertises that average annual compound rate
of
returns for various periods ending end of December 2005 are
as
follow :
10 years - 13%
5 years - 17%
2 years - 15%
1 year - 22%
Find the 5-year average annual compound rates of return for
the
period January 1, 1996 to December 31, 2000, and nd the
annual
rate of return for calender year 2004.
Solutions
Expert Solution
5 year average annual compound rate of return =((1+ 10 Year
rate)^10/(1+5 year rate)^5)^(1/5)-1
=((1+13%)^10/(1+17%)^5)^(1/5)-1 =9.14%
jeff jeffy answered 2 years agoRelated Solutions
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Year
Return (%)
Year
Return (%)
1
6.2
11
5.4
2
11.3
12
26.0
3
16.1
13
13.5
4
16.9
14
24.2
5
9.8
15
–1.5
6
18.3
16
1.4
7
11.2
17
15.7
8
–12.1
18
11.8
9
19.2
19
1.9
10
17.6
20
17.8
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State
Probability
Return
Depression
0.05
-20%
Recession
0.25
-5%
Normal
0.5
8%
Boom
0.2
30%
Multiple Choice
9.15%
10.25%
7.75%
8.00%
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The following tables shows 5 year returns of different funds Mutual Fund Annual Return (%) Year...
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Annual Return (%)
Year 1
Year 2
Year 3
Year 4
Year 5
Stocks
12.01
11.22
13.47
45.42
-21.93
Bonds
17.64
4.25
7.51
-1.33
7.36
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18.71
30.09
41.46
-23.26
Aggressive Value
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20.61
12.93
7.06
-5.37
Moderate Growth
33.44
19.40
6.77
58.68
-9.02
Moderate Value
24.56
25.32
-6.70
5.43
17.31
Let’s assume the minimum return every year across all the funds
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reported performance (average annual
return) for two of its funds as follows:
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Personal Strategy Growth Fund 9.50 percent
Assume you invested $10,000 in each fund at the beginning of this
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