A portfolio of non-dividend-paying stocks earned a geometric mean return of 5% between January 1, 2010, and December 31, 2016. T

Question

3 years ago

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A portfolio of non-dividend-paying stocks earned a geometric mean return of 5% between January 1, 2010, and December 31, 2016. T

he arithmetic mean return for the same period was 6%. If the market value of the portfolio at the beginning of 2010 was $100,000,what was the market value of the portfolio at the end of 2016

Business

1 answer:

Bezzdna [24] · Answer 1 · 2022-04-01T17:04:18+03:00

Answer: $140710

Explanation:

From the question, we are informed that the portfolio of non-dividend-paying stocks earned a geometric mean return of 5% between January 1, 2010, and December 31, 2016 and that the arithmetic mean return for the same period was 6%.

If the market value of the portfolio at the beginning of 2010 was $100,000, the market value of the portfolio at the end of 2016 will be calculated as:

= $100,000 × (1 + 5%)^7

= $140,710