1. A client has $2m to invest for retirement. She wants to take out $120,000 per year. Her portfolio has an expected return equal to 5% with a standard deviation equal to 8%. Compute the approximation to the geometric mean. Using the geometric mean approximation, how long is it expected to last?
2. A client has $1.6m to invest for retirement. He wants to take out $180,000 per year. His portfolio has an expected return equal to 8% with a standard deviation equal to 14%. Compute the approximation to the geometric mean. Using the geometric mean approximation, how long is it expected to last?
3. Given the following returns, compute the arithmetic average and geometric average.
(4%, 10%, -5%, 12%, -1%)
4. Given the following returns, compute the arithmetic average and geometric average.
(8%, -10%, 22%, -11%, 30%)