Precious metals

In 2006-2009, the value of precious metals changed rapidly. The data in the following table represent the total rate of return (in percentage) for platinum, gold, an silver from 2006 through 2009:

Year Platinum Gold Silver
2009 62.7 25.0 56.8
2008 -41.3 4.3 -26.9
2007 36.9 31.9 14.4
2006 15.9 23.2 46.1

a. Compute the geometric mean rate of return per year for platinum, gold, and silver from 2006 through 2009.

b. What conclusions can you reach concerning the geometric mean rates of the three precious metals?

Correct result:

r1 =  1.1095
r2 =  1.2065
r3 =  1.1765

Solution:

p1=62.7%=1+62.7100=1.627 p2=41.3%=1+41.3100=0.587 p3=36.9%=1+36.9100=1.369 p4=15.9%=1+15.9100=1.159  r1=p1 p2 p3 p44=1.627 0.587 1.369 1.1594=1.1095
g1=25.0%=1+25.0100=1.25 g2=4.3%=1+4.3100=1.043 g3=31.9%=1+31.9100=1.319 g4=23.2%=1+23.2100=1.232  r2=g1 g2 g3 g44=1.25 1.043 1.319 1.2324=1.2065
s1=56.8%=1+56.8100=1.568 s2=26.9%=1+26.9100=0.731 s3=14.4%=1+14.4100=1.144 s4=46.1%=1+46.1100=1.461  r3=s1 s2 s3 s44=1.568 0.731 1.144 1.46141.1765=1.1765  r1r2r3



We would be pleased if you find an error in the word problem or inaccuracies and send it to us. Thank you!



Showing 1 comment:
#
Dr Math
So all metals have approx the same rate of price growth per year over time

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