A stock had returns of 8 percent, - 6 percent, 18 percent and 27 percent over the past four years. What was the geometric return?
A) 10.31%
B) 10.67%
C) 11.06%
D) 11.43%
E) 11.75%

Question

Quizplus · Accepted Answer

To calculate the geometric return, we use the formula:
(1 + r1) × (1 + r2) × … × (1 + rn)^(1/n) - 1
where r1, r2, ..., rn are the annual returns and n is the number of years.

Plugging in the numbers, we get:
(1 + 0.08) × (1 - 0.06) × (1 + 0.18) × (1 + 0.27)^(1/4) - 1
= 1.1034 - 1
= 0.1034 or 10.34%

Therefore, the closest option is (C) 11.06%.

A Stock Had Returns of 8 Percent, - 6 Percent