please answer: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?
urgent response need please
not sure what you mean by "average geometric return", do you want the average compound interest rate?
if so...
45389 = 8500(1+i)^8
5.3398824 = (1+i)^8
1+i = 1.23938
i = .23938 = 23.938%
To calculate the average geometric return on a portfolio, we need to use the formula:
Average Geometric Return = (Ending Value / Beginning Value)^(1 / number of years) - 1
In this case, the beginning value (8 years ago) was $8500, and the current value is $45389. The number of years is 8. Plugging in these values into the formula, we get:
Average Geometric Return = ($45389 / $8500)^(1 / 8) - 1
Calculating this expression, we find:
Average Geometric Return ≈ 0.1638
Therefore, the average geometric return on this portfolio is approximately 16.38%.
Please note that this calculation assumes the returns were compounded annually over the 8-year period.