question archive A stock has had returns of 8 percent, 26 percent, 14 percent,-17 percent, 31 percent, and -1 percent over the last six years
A stock has had returns of 8 percent, 26 percent, 14 percent,-17 percent, 31 percent, and -1 percent over the last six years
Subject:ManagementPrice:2.87 Bought7
A stock has had returns of 8 percent, 26 percent, 14 percent,-17 percent, 31 percent, and -1 percent over the last six years. What are the arithmetic and geometric average returns for the stock? (Do not round Intermediate calculetions and enter your answers as a percent rounded to 2 declmal places, e.g., 32.16.)
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Answer:
Arithmetic average return=Total return/Total time period
=(8+26+14-17+31-1)/6=10.17%(Approx).
Geometric average return=[(1+rate1)(1+rate2)............(1+rate6)]^(1/6)-1
=[(1+0.08)(1+0.26)(1+0.14)(1-0.17)(1+0.31)(1-0.01)]^(1/6)-1
=8.92%(Approx).
