A stock has had returns of 14 percent, 32 percent, 15 percent, - 20 percent, 32 percent, and - 7 percent over the last six years. what are the arithmetic and geometric returns for the stock? (do not round intermediate calculations. enter your answers as a percent rounded to 2 decimal places,

e. g., 32.16.)

Question

Grumpy

Business

22 November, 03:12

A stock has had returns of 14 percent, 32 percent, 15 percent, - 20 percent, 32 percent, and - 7 percent over the last six years. what are the arithmetic and geometric returns for the stock? (do not round intermediate calculations. enter your answers as a percent rounded to 2 decimal places,

e. g., 32.16.)

+4

Answers (1)

Know the Answer?

Gordon Cervantes · Answer 1

The correct answer is 11% and 9.24%.

Explanation:

According to the scenario, the computation of the given data are as follows:

Arithmetic return=[ r1 + r2 + r3 + r4 + r5 + r6 ] : 6

By putting the value we get,

= [0.14 + 0.32 + 0.15 - 0.20 + 0.32 - 0.07 ] : 6

=0.66 : 6

=0.11 or 11%

Geometric Return = [ (1+r1) (1+r2) (1 + r3) (1 + r4) (1 + r5) (1 + r6]^1:6 - 1

By putting the value, we get

=[ (1+0.14) (1+0.32) (1+0.15) (1-0.20) (1+0.32) (1-0.07) ]^1:6 - 1

=[1.14 * 1.32 * 1.15 * 0.80 * 1.32 * 0.93]^1:6 - 1

=[16.9950]^1:6 - 1

=0.9241 or 9.24%