Investor has had the below returns in the Magic Fund for the past 4 years:

 15%, 25%, -30%, 18%.

a) Find the total return over the four years. Method of calculation should be clear. (5 marks)
b) Find the annual geometric return. Method of calculation should be clear. (5 marks)

c) State whether the annual geometric return (assume positive) should be higher, lower, or the same as the annual arithmetic return. Neither calculation nor explanation is necessary. (1 mark)

d) State which measure, annual arithmetic return or annual geometric return, better represents how an investment performed over time. Neither calculation nor explanation is necessary. (1 mark)

Answer rating: 100% (QA)

a The total return over the four years can be calculated as follows Total Return ... View the full answer