For the two questions below, consider the following period-by-period total returns:
Year 1: 5.00%
Year 2: 15.00%
Year 3: 25.00%
-What is the geometric average total return per year for the Years 1-3 period?

Question

Quizplus · Accepted Answer

The geometric average return is calculated by finding the product of the returns (expressed as a decimal plus one), taking the nth root (where n is the number of returns), and then subtracting one and converting back to a percentage. For these returns, the calculation is: [(1.05) * (1.15) * (1.25)]^(1/3) - 1 = 0.1471 or 14.71%.

For the Two Questions Below, Consider the Following Period-By-Period Total