A stock has had returns of 10 percent, 17 percent, 26 percent, -14 percent, 24 percent, and –9 percent over the last si...

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Question

A stock has had returns of 10 percent, 17 percent, 26 percent, -14 percent, 24 percent, and –9 percent over the last six year

business finance

Answer 1

Answer #1

Arithmetic average return=Total return/Total time period

=(10+17+26-14+24-9)/6

=9%

Geometric average return=[(1+rate 1)(1+rate 2).............(1+rate 6)]^(1/6)-1

=[(1+0.1)(1+0.17)(1+0.26)(1-0.14)(1+0.24)(1-0.09)]^(1/6)-1

=7.85%(Approx).

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Answer 2

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