Annualized Geometric And Arithmetic Returns 544659

Sally is reviewing the performance of several portfolios in the family trusts. Trust A is managed by Wall Street Investment Advisors and Trust B is managed by LaSalle Street Investment Advisors. Both trusts are invested in a combination of stocks and bonds and have the following returns:

Trust ATrust B

year 115%12%

year 21015

year 3-4-2

year 42520

year 5-8-5

a. Calculate the annualized geometric and arithmetic returns over this 5-year period.

b. Which manager performed the best, and is there a significant enough difference for Sally to move her money to the winning manager?

c. Explain the difference between the geometric and arithmetic returns.