(Solution) - Suppose that an investor opens an account by investing 1 000 -(2025 Original AI-Free Solution)

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Suppose that an investor opens an account by investing $1,000. At the beginning of each of the next four years, he deposits an additional $1,000 each year, and he then liquidates the account at the end of the total five-year period. Suppose that the yearly returns in this account, beginning in year 1, are as follows: 29 percent, 17 percent, 9 percent, 14 percent, and 24 percent. Calculate the arithmetic and geometric average returns for this investment, and determine what the investor's actual dollar-weighted average return was for this five-year period. Why is the dollar-weighted average return higher or lower than the geometric average return?