At the End of 2007, the IRA Owned by Joe

question 92

Short Answer

At the end of 2007, the IRA owned by Joe Smith had a value of $1.2 million. With a rate of return of −29.75 percent in 2008 and a rate of return of 2.98 percent in 2009, calculate the geometric mean rate of return for the two-year period.

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Definitions:

Standard Deviation

Standard deviation quantifies the variation or spread of a set of numbers from its mean, highlighting the volatility or risk associated with a financial instrument or investment.

Risk-Free Asset

An investment guaranteed to return the original investment without any loss, typically associated with high-grade government securities.

Indifference Curve

In economics, a curve that represents different combinations of goods or services among which a consumer is indifferent, showing preferences.

Risk-Free Asset

An investment that is expected to deliver its returns without any risk of financial loss, traditionally government bonds are considered close to risk-free.