A stock has produced returns of 11.9 percent, 5.6 percent, 16.4 percent, and -4.2 percent over the past four years, respectively.What is the geometric average return?

Question

Quizplus · Accepted Answer

The geometric average return is calculated by taking the nth root of the product of (1 + r1) * (1 + r2) * ... * (1 + rn), where r1, r2, ..., rn are the individual returns. In this case, the geometric average return is:(1 + 0.119) * (1 + 0.056) * (1 + 0.164) * (1 + -0.042) = 1.0714Therefore, the geometric average return is 7.14%.

A Stock Has Produced Returns of 11