[Solved] Fund Two Years Ago

 The Damon Investment Company manages a mutual fund composed mostly of speculative stocks.  You recently saw an ad claiming that investments in the funds have been earning a rate of return of 21%.  This rate seemed quite high so you called a friend who works for Damon’s competitors.  The friend told you that the 21% return figure was determined by dividing the two-year appreciation on investments in the fund by the average investment.  In other words, $100 invested in the fund two years ago would have grown to $121 ($21/$100 = 21%). 

Required:

• Discuss the ethics of the 21% return claim made by the Damon Investment Company.

Read a selection of your colleagues’ postings.