Over the last four years, a stock has had an arithmetic average return of 12.8 percent.Three of those four years produced returns of 22.6 percent, 15.2 percent, and -24.1 percent, respectively.What is the geometric average return for this four-year period?

Question

Quizplus · Accepted Answer

The geometric average return is calculated by multiplying the returns for each year and then taking the nth root, where n is the number of years. In this case, the geometric average return is:(1 + 0.226) * (1 + 0.152) * (1 + -0.241) ^ (1/4) - 1 = 0.1018 = 10.18%

Over the Last Four Years, a Stock Has Had an Arithmetic