A? company\'s stock price rose 0.9?% in? 2011, and in? 2012, it increased 16.6%.
ID: 2949450 • Letter: A
Question
A? company's stock price rose 0.9?% in? 2011, and in? 2012, it increased 16.6%.
a.
Compute the geometric mean rate of return for the? two-year period 2011?2012.(Hint: Denote an increase of 16.6?% by 0.166.)
b.
If someone purchased? $1,000 of the? company's stock at the start of? 2011, what was its value at the end of? 2012?
c.
Over the same? period, another company had a geometric mean rate of return of 32..43?%. If someone purchased? $1,000 of the other? company's stock, how would its value compare to the value found in part? (b)?
a.
Compute the geometric mean rate of return for the? two-year period 2011?2012.(Hint: Denote an increase of 16.6?% by 0.166.)
b.
If someone purchased? $1,000 of the? company's stock at the start of? 2011, what was its value at the end of? 2012?
c.
Over the same? period, another company had a geometric mean rate of return of 32..43?%. If someone purchased? $1,000 of the other? company's stock, how would its value compare to the value found in part? (b)?
Explanation / Answer
SolutionA:
geometric mean of a and b is sqrt(a*b)
=sqrt(0.009*0.166)
=0.001494
=0.001494*100
=0.1494% icr
Solutionb:
incraese=(1+increase)*original
=1+0.1494*1000
=1.1494
=1149.4
=1149
Solutionc:
32.43%
=32.43/100=0.3243
=(1+0.3243)*1000
=1324.3
=1324
Solutionb:
incraese=(1+increase)*original
=1+0.1494*1000
=1.1494
=1149.4
=1149
Solutionc:
32.43%
=32.43/100=0.3243
=(1+0.3243)*1000
=1324.3
=1324