Question

1. Fred purchased 100 shares of Ekto Corporation common stock for $30.3 per share on June 1, 2001 and then sold it exactly 11 years later for $43.91 per share. What was Fred's geometric mean average annual return on this investment?

   		4.08%
   		2.82%
   		3.43%
   		2.48%

1 points   

QUESTION 6

1. Fred purchased 100 shares of Ekto Corporation common stock for $31.99 per share on June 1, 2001 and then sold it exactly 3 years later for $43.53 per share. What was Fred's geometric mean average annual return on this investment?

   		12.02%
   		8.84%
   		8.15%
   		10.81%

Answer 1

Geometric Mean Average Annual Return = Compounded Annual Growth Rate (CAGR)

CAGR = (Future Value/Initial Investment)^{1/number of periods} -1

5)

Geometric Mean = (43.91/30.3)^1/11 -1 = 1.4491749^0.090909 -1 = 1.0343 - 1 = 0.0343 = 3.43%

6)

Geometric Mean = (43.53/31.99)^1/3 - 1 = 1.3607377^0.333333 -1 = 1.10813 -1 = 0.10813 = 10.813%

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