Baxter Inc.'s annual returns for the past four years were: 2.75%,-1.8%,7.2%,and 6.5%.What are the arithmetic and geometric average annual returns for Baxter over the four-year period?
A) Arithmetic mean = 6.80%; geometric mean = 3.35%
B) Arithmetic mean = 3.66%; geometric mean = 3.60%
C) Arithmetic mean = 14.65%; geometric mean = 10.05%
D) Arithmetic mean = 18.03%; geometric mean = 21.20%

Question

Quizplus · Accepted Answer

Arithmetic mean,AM = (2.75%-1.8%+7.2%+6.5%)/4 = 0.036625 F1S1S1W1F1F1F10 3.66%
Geometric mean,GM = [(1+0.0275)(1-0.018)(1+0.072)(1+0.065)]^(1/4)-1 = 0.036 F1S1S1W1F1F1F10 3.60%