Question

An investment pays the following annual rate of return over a four-year period. {4.12%,0.03%,2.79%,-11.47%} 1. The arithmetic mean return is 2. The geometric mean return is 3. The median return is NB: You may find the following definitions useful. a. The arithmetic mean of a sample of 4 observations is given by: ra = 1+2+3+4 4 b. The geometric mean of a sample of 4 annually compounded growth rates. 1 +rg = [(1 + r1)(1 + r2)(1 + r3)(1 + r4)]]/4 Check

Answer 1

Answer 1. AM 3X1 - 0,+82 +03+04 Coe annual 2016, nn of retuon ) = 4.12 + 0.03 +2.79 - 11.47 = -1.1325 7. 1) The arithmatio mean retuon is, -1.1325% 2. G. M = 4581 x 82 X8z xoa But here, 09=-11-47 is one negative value, Hence like zoo, it is impossible to calculate Geometaic mean with negative numbers. e) The geometric mean return is = % 3. Median Data aoranged by increasing ordeo. -11,47:10.031; 2.797,4.127. Median = size off(4) + 9 +1.7" item / 2 - Size of (2nd + god item = 0.03 +2.79 = 1.41 87 The median vetuon is 1-41%