What are the arithmetic and geometric average returns for a stock with annual returns of 19...

Question

Question

What are the arithmetic and geometric average returns for a stock with annual returns of 19 percent, 9 percent, –4 percent, and 13 percent?

Multiple Choice

Answer 1

Answer #1

arithmetic return = (sum of returns)/count

= (19 + 9 -4 + 13)/4

= 9.25%

Geometric return = [(1+r1) * (1+r2) ....(1+rn)]^(1/n) - 1

= [1.19 * 1.09 *0.96*1.13]^(1/4) - 1

= 8.91%

hence choose 9.25%; 8.91%

Answer 2

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