Over the last four years, a stock has had an arithmetic average return of 8.8 percent. Three of those four years produced returns of 16.3 percent, 10.2 percent, and - 14.1 percent. What is the geometric average return for this 4-year period?

Question

Rebekah Burch

Business

3 May, 11:50

Over the last four years, a stock has had an arithmetic average return of 8.8 percent. Three of those four years produced returns of 16.3 percent, 10.2 percent, and - 14.1 percent. What is the geometric average return for this 4-year period?

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Answers (1)

Know the Answer?

Micheal Yoder · Answer 1

Geometric Average return = 7.83%

Explanation:

First we need to find the missing value of data using Arithmetic mean formula

Arithmetic Mean = Sum of value / No of values

8.8% = Sum of Values / 4

Sum of Values = 8.8% x 4

Sum Values = 35.2%

Using Sum of Values we minus the remaining values in order to get the missing value of the data.

35.20% - 16.3% - 10.2% - (14.1%) = 22.80%

In order to get Geometric mean value we use geometric mean formula

G. M = 4 Sqrt (16.3% x 10.2% x - 14.1% + 22.80%)

Geometric Mean = 7.83%