Question

Telur 15. Arithmetic and Geometric Returns [LO1] A stock has had returns of 8 percent, 26 percent, 14 percent, -17 percent, 3
0 0
Add a comment Improve this question Transcribed image text
Answer #1

Arithmetic average is the simple mean

(8+26+14-17+31-1)/6 = 61/6 = 10.17%

Geometric mean gives a more better picture when we look into stock returns. It can be calculated as under

[(1+R1)*(1+R2)*(1+R3)*...*(1+Rn)]^(1/n) - 1

=(1.08*1.26*1.14*.83*1.31*.99)^(1/6) - 1

= (1.6699)^1/6-1

= 1.0892-1

=0.0892 or 8.92%

Add a comment
Know the answer?
Add Answer to:
Telur 15. Arithmetic and Geometric Returns [LO1] A stock has had returns of 8 percent, 26...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT