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23 December, 03:54

Joanne invested $15,000 six years ago. Her arithmetic average return on this investment is 8.72 percent, and her geometric average return is 8.50 percent. What is Joanne's portfolio worth today?

A. $23,989

B.$24,472

C. $26,409

D. $26,514

E. $26,766

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  1. 23 December, 05:14
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    B) $24,472

    Explanation:

    To calculate the present value of Joanne's investment, we need to calculate the future value of the investment 6 years ago. The formula we are going to use is:

    FV = principal x (1 + r) ⁿ

    principal = 15,000 n = 6 years r = geometric average return

    FV = $15,000 x (1 +.085) ⁶ = $15,000 x 1.085⁶ = $15,000 x 1.6315 = $24,472
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