Black Stone Mines stock returned 8, 16, -8, and 12 percent over the past four years, respectively. What is the geometric average return?
A) 6.59 percent
B) 7.36 percent
C) 7.75 percent
D) 9.94 percent
E) 10.33 percent

Question

Quizplus · Accepted Answer

The geometric average return is calculated by multiplying the returns together and then taking the nth root, where n is the number of years. In this case, the geometric average return is (1.08 x 1.16 x 0.92 x 1.12)^(1/4) = 1.0775, or 7.75%.

Black Stone Mines Stock Returned 8, 16, -8, and 12