The return pattern on your favorite stock has been 5%,8%,-12%,15%,21% over the last five years.What was your average return and holding period return over the last 5 years?
A)4.5%; 6.5%
B)7.4%; 38.9%
C)7.4%; 7.76%
D)7.4%; 76.73%
E)None of the above.

Question

Quizplus · Accepted Answer

The average return is calculated by taking the sum of the returns (5% + 8% - 12% + 15% + 21% = 37%) and dividing by the number of years (5), which gives 7.4%. The holding period return is calculated by multiplying the returns for each year (1.05 * 1.08 * 0.88 * 1.15 * 1.21 - 1) and converting it to a percentage, which gives approximately 38.9%.

The Return Pattern on Your Favorite Stock Has Been 5%,8%,-12%,15%,21