Over the past five years, an investment produced annual returns of 17, 22, -19, 3, and 15 percent, respectively. What is the geometric average return?
A) 5.42 percent
B) 6.49 percent
C) 8.00 percent
D) 15.60 percent
E) 16.00 percent

Question

Quizplus · Accepted Answer

The geometric average return is calculated by multiplying the returns (converted to decimal form) for each year, taking the nth root (where n is the number of years), and subtracting 1. The calculation is: [(1.17) * (1.22) * (0.81) * (1.03) * (1.15)]^(1/5) - 1 = 6.49%.

Over the Past Five Years, an Investment Produced Annual Returns