Submitted by: Submitted by kilamala
Views: 242
Words: 6026
Pages: 25
Category: Business and Industry
Date Submitted: 05/16/2011 03:40 PM
Question 1
a) Arithmetic mean = t=1nktn
kt = returns during each year = 0.152, 0.055, -0.02, 0.206, 0.107, -0.063, 0.122
n = number of years = 7
Arithmetic mean = 0.152+0.055-0.02+0.206+0.107-0.063+0.1227
Arithmetic mean = 0.5597
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Arithmetic mean ≈ 0.079857 ≈ 7.9857%
Therefore, the arithmetic mean rate of return between year 2003 to 2009 on funds invested in Global Equity Mutual Fund is approximately 7.9857%.
b) Geometric mean = t=1n(1+kt)1n-1
kt = returns during each year = 0.152, 0.055, -0.02, 0.206, 0.107, -0.063, 0.122
n = number of years = 7
Geometric mean = (1+0.152)·(1+0.055)·(1-0.02)(1+0.206)·(1+0.107)·(1-0.063)·(1+0.122)17-1
Geometric mean = (1.152)·(1.055)·(0.98)·(1.206)·(1.107)·(0.937)·(1.122)17-1
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Geometric mean ≈ 0.076167 ≈ 7.6167%
Therefore, the geometric mean rate of return between year 2003 to 2009 on funds invested in Global Equity Mutual Fund is approximately 7.6167%.
c) i) The real rate of return for year 2003:
kr= 1+knom1+ki-1
kr= 1+0.1521+0.015-1
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kr≈ 0.134975≈13.4975%
Therefore, the real rate of return earned on funds invested in Global Equity Mutual Fund for year 2003 is approximately 13.4975%.
The real rate of return for year 2004:
kr= 1+knom1+ki-1
kr= 1+0.0551+0.015-1
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kr≈ 0.038409≈3.8409%
Therefore, the real rate of return earned on funds invested in Global Equity Mutual Fund for year 2004 is approximately 3.8409%.
The real rate of return for year 2005:
kr= 1+knom1+ki-1
kr= 1-0.021+0.015-1
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kr≈ -0.034483≈-3.4483%
Therefore, the real rate of return earned on funds invested in Global Equity Mutual Fund for year 2005 is approximately -3.4483%.
The real rate of return for year 2006:
kr= 1+knom1+ki-1
kr= 1+0.2061+0.025-1...