Answer :
The geometric average return on this investment is e) 12.08%. So, option e is the correct answer.
The geometric average return on the investment that had an initial investment of $25,000 forty years ago and is worth $1,533,913.
Step 1: Compute the rate of return per year
R = (End value/Start value)^(1/n) - 1
Where, End value = $1,533,913
Start value = $25,000
n = 40 years
R = ($1,533,913/$25,000)^(1/40) - 1= 0.1037797 or 10.378%
Step 2: Calculate the geometric average return
GAR = (1 + R1) * (1 + R2) * ... * (1 + Rn)^(1/n) - 1
GAR = (1 + 10.378%)^40 - 1= (1.10378)^40 - 1= 12.0762 or 12.08%
Therefore, the geometric average return on this investment is e) 12.08%. So, option e is the correct answer.
To learn more about geometric average return, here:
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