You Invested $1,000 Through Your Broker Three Years Ago - Calculate the Annual Return for Each Year

question 67

Essay

You invested $1,000 through your broker three years ago.Your account balance at the beginning of each period is shown in the table below. $$\begin{array} { | l | l | l | } \hline \text { Time } & \text { Account Balance } & \text { Annual Return } \\\hline 0 & \$ 1,000 & \text { n.a. } \\\hline 1 & \$ 1,200 & \\\hline 2 & \$ 1,500 & \\\hline 3 & \$ 1,000 & \\\hline\end{array}$$ - Calculate the annual return for each year.Show your calculations in the table.
- Your broker called to tell you the good news that your average annual return over the three years has been 4%.Where did he get this number?
- At first you are confused.It seems as though the broker must be mistaken because you are no better off than when you started investing three years ago.But then you remember something from your favorite Investments class.Suggest an alternate measure for the average return.Calculate this measure and explain to your broker why it is more appropriate.
- Explain to your broker when it would make sense to use the 4% result that he initially quoted you.

Understand how theories and hypotheses drive research in psychology.

Understand measures of central tendency and variability (median, range).

Recognize the significance of generalizability and biases in survey research.

Differentiate between independent and dependent variables in experiments.

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Definitions:

Comarketing

A collaborative marketing strategy where two or more companies or brands work together on promotions or joint products to leverage each other's strengths and reach a wider audience.

Personal Determinants

Individual characteristics such as personality, attitudes, values, and behaviors that influence one's decisions and actions in various situations.

Cultural Experiences

Engagements that allow individuals to gain insight into and appreciation for the traditions, arts, customs, and worldview of a culture different from their own.

Needs and Motives

The psychological or physical deficiencies that prompt individuals to act in a certain way or pursue particular goals to satisfy those deficiencies.