George Rice is reviewing the performance of the portfolio that
George Rice is reviewing the performance of the portfolio that he has held for the past five years. He has decided to compare his portfolio returns with the market returns measured by the S&P 500 Index. The market values of his portfolio and the S&P 500 Index from 2008 through 2013 are given in the following table:


a. Compute the annual return for both the portfolio and the market.
b. Compute the simple arithmetic average return for both the portfolio and the market for the period 2008–2013.
c. Compute the geometric average return for both the portfolio and the market for the period 2008–2013.
d. Explain why the simple arithmetic average return is greater than the geometric average return for both the portfolio and the market.
e. Evaluate the performance of George’s portfolio compared with themarket.
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