Question
In: Finance
If the index value when you invested first in the equity market seven years back is...
If the index value when you invested first in the equity market seven years back is 32,000 and the current index levels are at 40,000, what is the holding period re- turn? What is the geometric average annual return that you would communicate to your friend on your investment?
Solutions
Expert Solution
Initial Index Value, I0 = 32,000
Number of years, n = 7
Final Index value, I1 = 40,000
Holding period return = (I1 - I0)/ I0 = (40,000 - 32,000)/32,000 = 25%
Geometric Average Annual Return = ( I1/I0)^1/n -1 = [ (40,000/32,000)^1/7] -1
= 3.239% = 3.24%
jeff jeffy answered 2 years agoRelated Solutions
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