question archive You've observed the following returns on Bama computer stock over the past five years: 21 percent, 9 percent, -16 percent, 10 percent, and 3 percent
You've observed the following returns on Bama computer stock over the past five years: 21 percent, 9 percent, -16 percent, 10 percent, and 3 percent
Subject:FinancePrice:4.94 Bought11
You've observed the following returns on Bama computer stock over the past five years: 21 percent, 9 percent, -16 percent, 10 percent, and 3 percent. What is the geometric return over this period?
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Computation of Geometric Average Return:
Geometric Average Return = [(1 + R1) * (1 + R2) * ... * (1 + RT)]^1/T - 1
=[(1 +21%)(1 + 9%)(1 + (-16%))(1 + 10%)(1 + 3%)^(1/5) - 1
= 1.2552^(1/5) -1
= 1.0465 - 1
Geometric Average Return = 0.0465 or 4.65%
