Blackstone Mines stock returned 10.5, 17.2, −9.0, and 14.5 percent over the past four years, respectively. What is the geometric average return?
A)5.84%
B)6.36%
C)7.78%
D)9.94%
E)10.33%

Question

Quizplus · Accepted Answer

The geometric average return is calculated by multiplying the returns (expressed as decimals) for each year, taking the fourth root (since there are four years), and then subtracting 1. The calculation is: [(1+0.105)*(1+0.172)*(1-0.09)*(1+0.145)]^(1/4) - 1 = 0.0778 or 7.78%.

Blackstone Mines Stock Returned 10