Use the table for the question(s)below.
Consider the following realized annual returns:
-The geometric average annual return on Stock A from 2000 to 2009 is closest to:
A)12.4%.
B)16.7%.
C)13.2%.
D)17.8%.

Question

Use the table for the question(s)below.
Consider the following realized annual returns: 
-The geometric average annual return on Stock A from 2000 to 2009 is closest to:
A)12.4%. 
B)16.7%. 
C)13.2%. 
D)17.8%.

Quizplus · Accepted Answer

The geometric average annual return is calculated by taking the nth root of the product of (1 + r1) * (1 + r2) * ... * (1 + rn), where r1, r2, ..., rn are the annual returns. In this case, the geometric average annual return is calculated by taking the 10th root of the product of (1 + 12.4%) * (1 + 16.7%) * ... * (1 + 17.8%). The result is approximately 12.4%.

Use the Table for the Question(s)below