a portfolio had an original value of $8500 eight years ag.the current value of the portfolio is $45389.what is the average geometric return on this portfolio?
This site may help you.
http://library.thinkquest.org/3096/42analy2.htm
To calculate the average geometric return on a portfolio, you'll need the original value of the portfolio and the current value. The average geometric return measures the compounded annual growth rate over a specific time period.
Step 1: Calculate the growth factor by dividing the current value by the original value:
Growth Factor = Current Value / Original Value
Growth Factor = $45389 / $8500
Growth Factor ≈ 5.3447
Step 2: Determine the number of years. In this case, it is 8 years.
Step 3: Calculate the average geometric return using the formula:
Average Geometric Return = Growth Factor ^ (1 / Number of Years) - 1
Average Geometric Return = 5.3447 ^ (1 / 8) - 1
Average Geometric Return ≈ 0.2361
So, the average geometric return on this portfolio is approximately 23.61%.