Question

2. 10.00 points A stock has had the following year-end prices and dividends. Year Dividend Price $ 99.15 107.11 91.65 127,16 162.15 192.50 $ 1.60 2.00 2.20 2.60 3.00 5 Required: What are the arithmetic and geometric returns for the stock? (Do not round Intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (eg. 32.16).) Arithmetic average return Geometric average return

Answer 1

Answer to question  

Airthmetic Average Return
Year	Return
1	0.00%
2	9.64%
3	-12.57%
4	41.15%
5	29.56%
6	20.63%
	88.41%
Airthmetic Average Return	14.74%
Geometric Average Return
Formula	(1 + R1) × (1 + R2) × ... × (1 +Rn))(1/n) - 1
Year	1	2	3	4	5	6
Return	0.00%	9.64%	-12.57%	41.15%	29.56%	20.63%
Add 1	1	1	1	1	1	1
(1+R1)	1.00	1.10	0.87	1.41	1.30	1.21	1.13
							-1
							13.29%
Geometric Average Return	13.29%
Working Note
Return calculation
Year	Price	Dividend	Return
1	99.15	0	0.00%
2	107.11	1.6	9.64%
3	91.65	2	-12.57%
4	127.16	2.2	41.15%
5	162.15	2.6	29.56%
6	192.6	3	20.63%
Return formula = (Closing price-opening Price+ dividend)/opening Price