Ulli Lohrmann and his wife, Suzanne Lohrmann, are planning for retirement and want to compare the past performance of a few mutual funds they are considering for investment. They believe that a comparison over a five-year period would be appropriate. They gather information on a fund they are considering, the Rhein Valley Superior Fund, which is presented in Exhibit 12. 

The Lohrmanns are interested in aggregating this information for ease of comparison with other funds. 

1. Compute the fund’s holding period return for the five-year period. 

2. Compute the fund’ s arithmetic mean annual return. 

3. Compute the fund’s geometric mean annual return. How does it compare with the arithmetic mean annual return? 

4. The Lohrmanns want to earn a minimum annual return of 5 percent. The annual returns and investment amounts are presented in Exhibit 13. Is the money-weighted annual return greater than 5 percent? 

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Exhibit 12: Rhein Valley Superior Fund Performance Assets under Management at the Beginning of Year (euros) Year 1 2 3 4 5 30 million 45 million 20 million 25 million 35 million Annual Return (%) 15 -5 10 15 3