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You have observed the following returns on Stock A's stocks over the last five years: -2.68%,...

You have observed the following returns on Stock A's stocks over the last five years: -2.68%, 4.18%, 3.6%, 13.36%, 3.2% What is the average return on the stock over this five-year period? Note: Enter your answer in percentages rounded off to two decimal points.

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Answer #1

Average return of a stock over a period can be calculated using either arithmetic mean or using geometric mean.

Average return using arithmetic mean = (-2.68+4.18+3.6+13.36+3.2)/5 = 4.33%

Average return using geometric mean = (((100-2.68)*(100+4.18)*(100+3.6)*(100+13.36)*(100+3.2))^(1/5))-1 = 4.21%

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