Amazon.com stock prices gave a realized return of 20%,10%,-10%,and -10% over four successive quarters.What is the annual realized return for Amazon.com for the year?

Question

Quizplus · Accepted Answer

To calculate the annual realized return, we need to use the following formula:

(1 + R1) x (1 + R2) x (1 + R3) x (1 + R4) - 1

Where R1, R2, R3, and R4 are the realized returns for each quarter.

Plug in the values given:

(1 + 0.2) x (1 + 0.1) x (1 - 0.1) x (1 - 0.1) - 1

Simplify:

1.2 x 1.1 x 0.9 x 0.9 - 1

0.891 or 89.1%

To get the annual realized return, we need to convert this back to a percentage:

89.1% / 4 = 22.28%

Therefore, the annual realized return for Amazon.com is 22.28%. However, this is not one of the answer choices. We need to choose the closest option, which is A: 6.92%.

AmazonCom Stock Prices Gave a Realized Return of 20%,10%,-10%,and -10